April 7th, 2009

I guess a lot of people have heard of Starfield and their extraordinary discoveries in the Ferguson lake property in Nunavut/Canada. This big piece of land is basically what makes the company; not only does it hold a huge sulphide-nickel-copper-cobalt-PGM-iron mineralization, but lately there have been diamond and gold findings, as well.

The latest resource estimation (indicated and inferred) gives 44.2M tonnes grading 1.01% Cu, 0.67% Ni, 0.08% Co, 0.28g/t Pt and ~1.7g/t Pd. Note that this discovery is still open at strike and depth. What should also be mentioned is that under the latest mining evaluation the PGM metals were not included and it remains unclear how these will be handled.

Because of the special nature of the discovery it will be mined/enriched in an unusual way, I don't want to go into all the technical details, but basically a leach process creates hydrogen sulphur which then reacts with oxygen to produce a lot of heat and thereby making it possible to power the entire mining operation with it and possibly selling what's left over. This process would make the operation relatively inexpensive and environmentally friendly.

The value of what's known to be in the ground today is (very approximate): $1.5B Cu, $2.7B Ni, $3.2B Co, $411M Pt and $482M Pd. Total value is $8,3B. Let's not forget that this discounts the value of sulphuric acid and iron.

The mcap is ~C$50M, they have ~C$6M cash and no debt. On the scoping study base model (which roughly translates to the same valuations as mentioned above), the EBITDA result for the operation is expected to be about C$266M per year, and the initial cost to build the mine would be about C$1.2B (expected to start construction in 2011).

The mineralizations of Ferguson lake are very likely to be heavily expanded, foremost at depth. This makes for a very long lived mining operation that even under these poor circumstances of a financial crisis is looking to make good profits.

With the crash of metal prices the share price of Starfield has gone down from 1.2 to 0.14, where it sits today. What is interesting about Starfield as opposed to Roca mines for example, is that it is a very profitable operation even at these prices and at the same time it is a great leverage opportunity if prices turn up again.

I don't know exactly where the checks are for global price stability of metals these days or coming years, but I don't honestly think it's important. Starfield has a great discovery that will stay profitable a lot longer than many of the other suppliers. Sure the SP can drop heavily next week if metal prices crash further, but for the long term this is a money making machine. Based on the value of what's in the ground, the great expansion potential and the gold and diamond discoveries - C$50M is not expensive. So even for a short-sighted investor this could be interesting as they might actually be bought out.