Significantly, this shrewdly-managed Canadian mining junior is drilling into consistently impressive grades at one particular gold deposit that exhibits the potential to host well over a million ounces of gold. However, the dynamics supporting this scenario, as well as the prospect of other major discoveries on the company’s contiguous (connected) land holdings, need to be put into proper perspective.

 

The northwestern corner of Quebec where the company is active has been a prolific gold producer for decades. Northern Star has assembled a strategically impressive land position along the 400 mile long by 30 miles wide Cadillac Break. This gold-rich mineral trend runs through the famed Abitibi Greenstone Belt (where approximately 150 million ounces of gold have historically been mined). This very-accessible, 1,200-hectare land package consists of 53 contiguous claims that are a few kilometres west of Val d’Or and just south of the Trans-Canada Highway.

 

By way of background, the Val d’Or region (that includes the Cadillac and Malartic Gold Camps) has historically produced between 40 and 45 million ounces of gold and has excellent infrastructure.  Furthermore, at least two million ounces of this prolific production came from the Malartic Goldfields Mine, which is adjacent to Northern Star’s flagship Midway Project. Northern Star’s mid-grade Midway Deposit is also in close proximity to several other mines. 

 

The company’s ongoing drilling success is a testament to the many years of planning and strategizing that preceded Northern Star’s decision to stake its reputation on a ‘golden corridor’ that skeptics regard as largely mined-out.

 

Here is why Northern Star is confounding its critics. The Malartic Goldfields Mine and its geologically fertile surroundings were far from stripped bare when the mine closed in the 1960s. Instead, its demise was forced by the difficulties of making a profit in an era when the Gold Standard had bullion trading at a fixed price of $35 an ounce.

 

Mr. Michel David began examining and assembling the exhaustive database on the Malartic Goldfields mine in the mid 90’s and painstakingly produced a geological model of the gold mineralization.

 

In 2002, the property was acquired by Northern Star, and with Michel David planning and supervising the exploration, began drilling the project to prove Michel’s proposed model.

 

The drilling was successful and not surprisingly, Michel later took the helm of Northern Star. A seasoned gold explorationist, Michel David is now surrounded by an accomplished management team and consultants that have been involved in several mineral successes in the past. They are now well on their way to making Northern Star another major success story. For instance, the Midway Project is only the first of up to 10 new gold discoveries (and four existing gold zones) that Northern Star is involved in and which all exhibit excellent potential.

 

With an initial focus on Midway, the company started out with a 25,000-foot drill program about a year ago. But a series of quick successes induced the company to increase its exploratory and in-fill drill program to at least 50,000 feet. That target has been expanded further -- up to 100,000 feet of drilling by the end of 2005 now appears to be a reasonable target.

 

At last report, Northern Star had completed assays for 54 drill holes on the properties and most of them delivered promising gold values. The company’s drilling has expanded the dimensions of the four existing ore zones and discovered at least 10 new lenses and porphyry mineral structures or deposits.  Most of Northern Star’s drill holes have encountered potentially economic gold-bearing zones.

 

The company’s assays have delivered an average gold content of about 0.27 ounce per ton over zones that average close to 30 feet in thickness. This is a significant development as the average grade for past-producing underground mines in this prolific gold district are between 0.15 and 0.20 ounces per ton. Even though these are relatively low grades for underground mining operations, these large deposits often exhibit uncomplicated metallurgical characteristics, translating into surprising low mining costs. The fact that Northern Star’s average grades to date are appreciably higher further improves the odds of commercial success at Midway and elsewhere.

 

Some of the company’s gold intersections have been stellar. One drill hole earlier this year encountered a zone about 22 feet thick that contained an average gold content of about 0.65 ounce per ton. That area, in the main body of the Midway discovery, was part of a wider area that yielded an assay of 0.24 ounce per ton over about 77 feet.

 

The higher grades are not just confined to Midway. Northern Star’s Halet Zone produced an assay of 0.44 ounce per ton over 27.4 feet, and that was part of a wider intersection that delivered a gold content of nearly 0.4 ounce per ton, spread over 41.5 feet. Several other holes have encountered similar promise in the Halet area and the Upper Halet Zone now extends for over 700 feet and remains ‘open’ (continuous) in both directions.

 

Notably, virtually all of the 14 discovery zones to date are open in all directions, including at depth. Most of Northern Star’s drilling has been confined to the uppermost regions of the Midway Project. As a result, gold intersections have been confined to the upper 1,000 feet of the property, although Northern Star did recently score its deepest intersection yet, producing an assay of 0.165 ounce per ton over 25.6 feet at a depth of just over 1,600 feet. 

 

That still leaves a considerable amount of untested potential at Midway. By comparison, the Malartic Goldfields Mine produced gold down to about 3,000 feet. Other mines in the Val d’Or region have been proving up gold deposits at far greater depths. For instance, the shaft at Agnico Eagle’s Laronde Mine now descends to nearly 7,500 feet and the company has an indicated resource running to a depth of up to 10,000 feet. 

 

With the increasing amount of potential ore and the promising grades, Northern Star could quickly become a profitable, low-cost gold miner. This scenario becomes even brighter when considering the impressive infrastructure that Northern Star also benefits from. For instance, the two million ounces of gold produced at the Malartic Mine were moved to the surface by way of two mining shafts – one that today is on the Midway property and another that is a short distance away (which the company is in negotiations to acquire). These three-compartment shafts are nearly 3,000 feet deep and would these days each cost about Cdn. $75 million to sink and equip. 

 

Once upgraded and reactivated, the shafts would clearly prove invaluable assuming Northern Star develops a new mine, but they also play a key role in the company’s ongoing exploration program. Northern Star will be able to use the shafts to drill some if its new gold zones from underground, and that would provide a three-dimensional picture of the ore bodies. That additional data will allow the company to quickly produce a calculated reserve base for its Midway Project. In turn, this would go a long way towards outlining an initial blueprint for a mine.

 

Other key factor that would keep mining costs down include the proximity of an operating mill just a few kilometres away, while several other mills are also nearby. Due to the accessibility of power, fuel and supplies in this mature mining district, the company estimates that it will be able to produce gold for something between $25 and $100 per ounce – extremely impressive numbers, even in the higher range.  

 

The Midway Project aside, there is no shortage of gold throughout the area as Northern Star and its neighbours are discovering new gold zones with an encouraging frequency. In particular, Northern Star has added 10 new discoveries of mineralized structures or deposits to the existing four zones/deposits that it originally acquired. All told, the company expects to place three of its new high-grade lens deposits into production over the next 18 months.

 

Another favourable component to Northern Star’s emerging gold resource picture is the prospect of developing the old mining town of Halet, itself. Once home to the miners who worked in the Malartic Mine, it now appears to have been sitting on top of a significant gold resource. Back in the 1960s, the town’s situation placed a large amount of ground beyond the reach of explorers.

 

There was no real exploration work in the area after the mine’s shut-down, despite the fact that the entire town was razed in the following years. Northern Star is now changing all that, and the Halet and Upper Halet zones are important cogs in the company’s plans for outlining a potential multi-million ounce resource inventory.last

 

Although the Midway Property is Northern Star’s primary project, the company has several other properties along the Cadillac Break that have excellent potential. The 4,200-hectare Cadillac AWG Property is vying to be at the top of that list. The company recently turned up an unexpected gold find on the project, which is about four kilometres southeast of Agnico Eagle’s Laronde Gold Mine and adjacent to the former O’Brien Gold Mine, now held by Radisson Mining Resources.

 

The proximity of those mines was a key factor when Northern Star acquired the AWG claims early this year, but the company also wanted to increase its exposure to the area just west of Agnico Eagle’s Lapa Deposit, where an active drill program last year identified more than one million ounces of gold.

 

Early last year, Northern Star gave Radisson permission to carry out a deep drilling program on the AWG Property. That resulted in the discovery of gold mineralization on the company’s ground. Northern Star subsequently drilled two holes of its own to confirm the finding. The first hole detected the reported porphyry zone about 250 feet above the Radisson intersection, while the second hole tested the area about 100 feet below the Radisson zone.

 

The first hole encountered a narrow gold intersection, while the second hole returned a grade of nearly 0.05 ounce per ton over a true width of 13.5 feet. The initial Radisson intersection had assayed at 0.135 ounce per ton over a true width of 6.5 feet. The unexpected but exciting result on AWG has Northern Star considering its next move for the promising project.

 

Indeed, the AWG discovery is particularly significant because the history of the area suggests that higher-grade lens deposits are often found in the vicinity of porphyry deposits all along the Cadillac Break. Additionally, there have been no previous attempts to drill the area. So the exploration potential on the AWG Property seems wide open.

 

Northern Star has a number of other properties along the Cadillac Break. The 864-hectare Malartic Break Project is about six kilometres northwest of the Midway property, and like all of the company’s projects, it lies close to the sites of some prior gold producers. The 70-hectare Thompson River project is about seven kilometres east of the Midway Property and about 500 metres south of the 1.6-million-ounce Goldex Deposit that is being developed by Agnico Eagle.

 

Northern Star acquired its 275-hectare Cadillac Project (not to be confused with the AWG Property) in the summer of 2003. The Cadillac Project is also in close proximity to Agnico Eagle’s Lapa Deposit, situated on its eastern flank.

 

Indeed, Northern Star has come a long way since Mr. Michel David joined the company as Chairman of the Board early in 2003. Now also President, Mr. David has nearly 30 years in the global mineral exploration and development to his credit. Though his gold hunting has taken him as far a field as Africa, South America and Asia, he has always made the gold-rich Abitibi Greenstone Belt his primary focus.  

 

On a technical note, Northern Star has a reasonably tight share structure with approximately 25 million shares outstanding (about 30 million fully diluted). Such a situation, matched with positive news flow, typically acts as a catalyst to higher share price valuations. The company also benefits from the involvement of several institutional investors – typically a sign that the company’s business model satisfies the scrutiny of sophisticated stock market professionals. The company also has a healthy treasury of at least Cdn. $2.4 million. The continuation of successful drill results into 2005 should also give the company easy access to future financings -- and at higher share price multiples.

 

The likelihood that Northern Star will be in production from at least three of its 14 gold discovery zones within 18-24 months make the company a clear stand-out among mining juniors. By also taking into consideration the emergence of a "rising tide" market for gold bullion prices, these dynamics give SmallCapMedia good reason to view the company as appreciably undervalued. However, mining stocks have been experiencing an across-the-board seasonal lull which will likely give way to a renewed upward trend in share prices as the 2005 exploration season gets underway.

 

Meanwhile, a very successful ongoing drill program continues to build intrinsic value into the company’s share price. And the prospect of outlining new gold resources at any of Northern Star’s more recent discovery zones also offers considerable "blue sky" potential. All told, SmallCapMedia believes that Northern Star is on-track to be one of the top performers in the mining sector in 2005 and beyond.