Magnus (http://www.magnusresources.com/) is now in the early stages of developing a similarly unprecedented opportunity. Specifically, early-stage exploration results are shaping up to be comparable to Southwestern’s findings in the early days of its headline-grabbing discovery a mere couple of years ago. Of course, we are referring to Magnus’ flaghip Hui Dong Property, situated on the border of Sichuan Province and only about 10 kilometres north and northwest of Southwestern’s most significant gold finds, which are collectively known as the Boka Gold Project.

 

This important discovery – located on the margin of neighbouring Yunnan Province – in one of the world’s last frontiers for multi-million ounce gold deposits has propelled Southwestern’s share price as high as Cdn. $43 (U.S. 34.50). Even though Magnus signed a joint venture agreement to explore its expansive 83-square-kilometre gold/copper prospect a little less than a year ago, the Company has good reason not to have wasted any time with an ambitious and aggressive work program.

 

Of particular significance is the fact that the Hui Dong Property is believed to be on trend (in alignment) with Southwestern’s prolific and richly mineralized Boka structure. For instance, the discovery of numerous gold-in-soil anomalies at the Hui Dong land package adds considerable credence to this theory. More on this later.  It is also worth noting at this juncture that the full extent of the Boka Gold Project’s mineralized horizon has yet to be fully determined. But it is already shaping up to be an epic world-class discovery.

 

Indeed, mining analyst Eric Zaunscherb of the major U.S. investment firm, Raymond James Financial, estimates that the trend’s initial 9.5-kilometre strike length may potentially contain up to 8.4 million ounces of gold. He is again recommending Southwestern as a “strong buy” with a 6-12 month target of Cdn. $25 (following the stock’s 2 for 1 split), while Octagon Capital’s mining analyst, Paolo Lostritto, recently announced a one-year target of Cdn. $28.

 

On an equally encouraging note, the Boka Trend’s “golden corridor” is hosted by a structural and stratigraphic geological setting that is very similar to that of the Hui Dong Property. Specifically, various shear zones on Magnus’ jointly–held property compare closely with shears that host Boka’s multiple discovery zones. (Shears are structural weaknesses in the earth’s crust into which gold veins and other minerals often migrate from greater depths). Additionally, the presence of encouraging gold and copper values found in rock samples and in-soil anomalies at a number of Hui Dong’s shear zones makes this scenario all the more compelling.

 

As previously mentioned, Magnus is currently conducting an extensive, systematic, property-wide geochemical survey that is yielding very encouraging results. The significance of these findings is underscored by Southwestern’s publicly-disclosed announcement that there is clearly a “positive association between mineralization at the Boka Gold Project and gold-in-soil anomalies.” In fact, Southwestern’s well-respected geological team has also stated that the Boka Trend has the further untapped potential to host other world-class gold deposits.

 

Magnus also benefits considerably from its recently-announced partnership with the China Yunnan Province Nuclear Industry Brigade 209 (“Team 209”). This highly competent team of government-sponsored geologists has been instrumental in the rapid development of the Boka Gold Project by way of a similar joint venture partnership with Southwestern Resources. As the operator of the Hui Dong Property, Magnus is working closely with Team 209 with the implementation of a similar exploration strategy to the one that has proven so successful at the Boka Gold Project.

 

By way of background, approximately a dozen key discovery zones within a 25-kilometre-long mineralized horizon at the Boka Gold Project have been identified to date. This impressive accomplishment was expedited by way of the mapping, surveying and geochemical sampling of up to 200 shallow tunnels and pits that were excavated by peasant/artisanal miners who swarmed the hillsides following word of the discovery of gold in 1999.

 

Southwestern reports that these small-scale illegal miners (who are now denied access to the area) were hand-mining such rich grades that a cut-off grade as high as 5 grams per tonne was commonly used. Moreover, the widespread occurrence of visible gold in many of the tunnels further suggests the presence of rich grades which are likely hosted within numerous vein systems. One of the first tunnels sampled by Southwestern yielded a vein 34.5 metres long that boasted bonanza grades as high as 75.2 grams per tonne (2.42 ounces per ton).  Team 209 now has a pilot vat leaching mining operation where up to 15,000 tonnes of gold ore is produced from a number of small tunnels at an impressive average grade of 10 grams per tonne.

 

Magnus is especially encouraged by the fact that peasant miners until recently (they no longer has legal access to the property) previously extracted rich gold mineralization from at least 65 hand-dug tunnels in the hillsides of its geologically and topographically very similar property. Of great benefit to the Company is the fact that comparable tunnels and pits dug by miners at Southwestern’s property helped expedite the discovery of gold zones with the highest grades and thus the most potential. Magnus’s property is separated from the Boka Gold Project by the Jiang River – a rich drainage system for the rugged mountainsides that has also been panned for placer gold over the centuries.

 

The pits and tunnels at the Hui Dong Property are the focus of much of the Company’s initial exploration activities. It is also worth noting that both adjoining properties have a history of small-scale copper mining dating back to the 1960s (an industrial  mineral which had more tangible value to China’s past central governments than gold). In fact, the Boka Gold Project and the Hui Dong Property straddle five major copper producing areas in the Sichuan and Yunnan provinces.

 

This region includes one of China’s highest-yield mining hot spots, the Dongchuan Copper Camp, which is located about 50 kilometres south of the Hui Dong Property and has been mined for over 500 years.  It is therefore not surprising that a 2004 rock sampling program on the Hui Dong Property encountered values running as high as 4% copper. Impressively anomalous and very prospective gold values are also being encountered in a similar manner.

 

Among Magnus’ key competitive advantages is the availability of satellite imagery for both the Hui Dong Property and Boka Gold Project. This invaluable state-of-the-art exploration technology will be used by Magnus to look for zones of hydrothermal alteration on both properties. Accordingly, by studying the “geological footprints” of Southwestern’s key discovery zones, Magnus can thus search for similar features at the Hui Dong Property. In addition to extensive geochemical soil and rock sampling, Magnus is also using other corroborative exploration techniques. They include structural and stratigraphic mapping, as well as geophysical and surveying satellite imagery analysis to define targets for follow-up trenching and tunneling. Drilling of the most prospective targets is expected to commence by the fall of this year.

 

Magnus’ level of commitment to ensuring a successful, cost-efficient exploration and development program is underscored by the Company’s contractual agreement to spend up to U.S. $5 million on the property in return for earning up to a 90% interest. Team 209 will own the remaining 10% interest upon the fulfillment of this joint venture agreement.

 

Additionally, the Company also increased the size and scope of its exposure to this geologically-rich region in October of 2004 with the addition of the adjacent 44-square-kilometre Luquan Property. Of additional interest to readers is the fact that Magnus has the option to also increase the size of its Hui Dong Property to more than 300 square kilometers should its 2005 exploration program achieve the desired results. The expansion would include the acquisition of exploration rights to four similarly geologically prospective adjoining properties.

 

Elsewhere, Magnus has also entered into a joint venture partnership with Team 209 to explore and develop a 200-square-kilometre gold/copper property in Qinghai Province. Known as the Qilian Project, it encompasses an under-explored, richly mineralized region of western China. Until only several years ago this region served for four decades as a highly sensitive, restricted military zone related to China’s space program. The predominantly virgin property includes the Donggou Deposit, where recent small-scale mining by artisanal miners has revealed the presence of high-grade copper in numerous mineralized structures. Very respectable gold values have also been encountered.

 

Samples collected from the Donggou Deposit’s two tunnels returned values as high as 14.9% copper and 2.57 grams per tonne of gold. Magnus has also conducted early-stage channel sampling and trenching, which further corroborated the presence of impressive mineralization. Moreover, the presence of abundant placer gold in the streams and rivers that drain the area also attest to its potential for impressive polymetallic discoveries.

 

Indeed, a preliminary investigation of the Donggou Deposit suggests it bears close similarities to the porphyry-related, gold-rich skarn Fortitude Deposit of central Nevada.  Reserves at Fortitude in 1987, shortly after its discovery, were stated to be 6.7 million tons of 8.02 grams per tonne of gold.

 

The Qilian Project lies within a major tectonic zone of parallel, northwest trending faults.  Rocks in the mine area are very fractured, creating a very favorable environment for the emplacement of copper and gold mineralization. Abundant quartz calcite veins are common near the mine tunnels and especially in the more copper-rich zones in the upper mine tunnel.  Mineralization is hosted by shear zones related to the strong, northwest-trending tectonic forces that shaped the region’s geology. Evidence of placer gold mining, i.e. small pits and rock piles, is also common along the rivers banks and streams channels that drain the area.

 

Magnus and its partner intend to conduct a near-term systematic exploration program at the Qilian Project with an initial focus on the Donggou Deposit. It will consist of channel sampling of underground workings, surface geological mapping and sampling of mineralized outcroppings, as well as small-scale drilling. Also, the program includes ground-based geophysical surveys and airborne reconnaissance (including the use of satellite imagery) to expose similar mineralized zones within the project area.

 

Magnus will finance this venture under almost identical terms to the Hui Dong Property joint venture agreement. This agreement also makes provision for the acquisition by the joint venture partnership of the existing Donggou Deposit, as well as mining assets, mining rights and mining permits, for a consideration of U.S. $2 million.

 

This might be an appropriate juncture to discuss why Magnus is far and above one of SmallCapMedia’s top stock picks for 2005 and beyond among all the diverse market sectors that we cover.

 

First of all, it is very important to appreciate that Magnus is an early-stage market entrant in a largely-untapped, vastly expansive frontier for world-class gold and base metal discoveries. This presents Magnus with unprecedented opportunities that are without comparison anywhere in the world today and in virtually any industry – particularly in the aftermath of the Dot Com bubble.

 

Indeed, there are many compelling dynamics that are converging to assure China’s ascendancy in the years to come as the next global gold producing powerhouse. Already, China is the world’s fourth largest gold producer, with an annual output of approximately 175 tonnes in 2002. However, most of the country has not yet been systematically explored using modern exploration techniques.

 

This presents shrewd, politically well-connected Western companies like Southwestern and Magnus tantalizing opportunities to unearth some of China’s vast untapped mineral wealth. Furthermore, a booming economy, liberalized business regulations, and an aggressive pursuit of foreign investment, have clearly set the stage for the dawn of a modern day “gold rush” in China.

 

Such a scenario has taken on a particularly lustrous dimension with China’s recent acceptance as a member of the World Trade Organization. In effect, it safeguards China’s newly-found status as a secure and stable investment environment (albeit with a developing tax and legal system), particularly when compared to other developing countries. And the extensive reform of China’s mining laws just within the last several years has further dramatically improved the business climate for foreign mining companies.

 

Accordingly, Magnus is among the first wave of North American mining companies to benefit from a once-in-a-lifetime opportunity to earn unrestricted and unencumbered access to some of China’s most geologically prospective and under-explored regions.

 

And the significance of such a development cannot be overstated as China now represents one of the world’s final frontiers for the discovery of world-class multi-million ounce gold discoveries. For instance, its geological potential is illustrated by Southwestern Resources’ recent multi-million-ounce gold find right “next door” to Magnus’ much-envied Hui Dong Property. Moreover, Southwestern has demonstrated that the advent of sophisticated, modern mining technology and expertise is crucial to the discovery and development of large, richly-mineralized gold deposits.

 

And the scope for other world-class discoveries is considerable. This is illustrated by a 2002 U.S. Geological Survey report on China that states “…it is likely that many of the Carlin-type gold ore districts in China, when fully developed, could have resource potential comparable to the 1,000-tonne gold resource in northern Nevada…” 

 

Likewise, the China Geological and Mineral Survey Bureau has conducted its own surveys which arrive at the same conclusion. It also estimates that China’s ten major gold producing provinces have untapped gold resources of at least 1,000 tonnes.

 

However, China’s mining industry has to date literally and figuratively only just “scratched the surface” of this potential. By way of explanation, most of the country’s annual gold production is very fragmented as is conducted on a very small-scale involving up to 1,200 producers. Hence, the lack of sophisticated mineral exploration and development, matched with production inefficiencies and lack of modern technical acumen, is seriously limiting the country’s rate of potential production.

 

Thus, China has a pressing need for Western capital and more importantly, the technology transfer from North American mineral explorers, to develop the nation’s domestic mineral reserves. To spur on the influx of foreign mining companies, numerous mining-friendly initiatives are now being implemented – ones that Magnus stand to benefit from immeasurably.

 

In return, Magnus boasts comparable geological sophistication and expertise to Southwestern Resources. And by partnering with Team 209 (the same group of Chinese geologists who have spearheaded Southwestern‘s extraordinary success to date), Magnus is an odds-on favourite to duplicate a good measure of the success of its Canadian peer.

 

Like Southwestern, Magnus has formulated a winning strategy – one that offers to reward patient shareholders with the very real prospect of a “home run”. Indeed, all the right dynamics are already in place to ensure the likelihood of a sustained uptrend in the Company’s share price during the balance of 2005. However, the stock’s upward trajectory promises to gather considerably momentum with the advent of an anticipated fall/winter drill program at the Hui Dong Property.

 

On a technical note, Magnus has a relatively tight share structure with approximately 22.5 million shares outstanding (about 26.5 million fully diluted). Such a scenario, matched with positive news flow, typically acts as a surefire catalyst to higher share price multiples. Thus, SmallCapMedia is confident that Magnus will be a strong performer in 2005.

 

And if the Company produces drill results in 2006 that are in any way comparable to those of Southwestern Resources, then Magnus’ stock will surely become a very hot commodity. Again, shrewd investors should note Southwestern’s assertion that there is a “positive association between mineralization at the Boka Gold Project and gold-in-soil anomalies.” Magnus is already beginning to replicate the type of high-grade soil assay results that have been used by Southwestern as a highly effective guide to drilling into rich mineralization. Accordingly, SmallCapMedia fully expects Magnus Resources to firmly establish itself as a “rising star” in the mining sector within the next 12 months.