amarillo gold corp. everyone should get a...

RESEARCH QUICK NOTE October 17, 2011

RATING: NOT COVERED, SPECULATIVE

Eric Zaunscherb, CFA, B.Sc. (Geology) [email protected], 604.664.2937

Ticker: V-AGCPrice $1.3852-Week Range $1.90 - $0.861-Month Avg. Daily Volume (K) 27.8Shares Outstanding (M) 56.1Market Capitalization ($M) $77.5Working Capital ($M) $7.7Long Term Debt ($M) $0.0Enterprise Value ($M) $69.7

Note: Capital IQ financial data are current to the latest interim fInancial statements (e.g. recent equity raises will not be reflected in working capital).

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Amarillo Gold is a Vancouver-based mineral exploration and development company focused in Brazil. The primary asset is Mara Rosa in central Brazil, with a prefeasibility study near completion. Amarillo Gold’s second project is the Lavras do Sul located in southern Brazil. Lavras do Sul is the largest land package assembled in the 300 year mining history of the Lavras Intrusion with 19 garimpos identified.

All figures in C$, unless otherwise specified.

Everyone Should Get a Brazilian

Highlights

• Amarillo is focused on advancing gold projects with attractive upside and benefitting from superior infrastructure in Brazil. We consider Brazil to be highly prospective, under-explored and ripe for consolidation.

• The Company’s primary asset is the Mara Rosa project located approximately 320 kilometres north of Brasilia with paved road access. A prefeasibility study is expected imminently and we are looking for a robust project delivering +100,000 oz/a. Ultimately we believe that Mara Rosa has the potential to deliver 2 million ounces of resources. A recent resource upgrade featured strong resource growth, increased grade and enhanced confidence levels.

• The next project in Amarillo’s pipeline is Lavras do Sul, located in Rio Grande do Sul in the south of Brazil. Infrastructure is excellent, as is the exploration upside. The project encompasses a large 10 by 10 kilometre intrusive body that begat a historic mining district with multiple garimpos. We expect the Lavras do Sul project to eventually feature a number of one-quarter to one million oz deposits feeding a central mill facility.

• The Company is well-positioned having a strong, experienced management slate and board, an attractive capital structure and a balance sheet recently topped up in a financing grossing $10 million.

• Amarillo is trading attractively on an enterprise value per ounce basis at $39 as compared to the adjusted mean of $64 for the broad exploration and development peers that we track.

AMARILLO GOLD CORP. (V-AGC, $1.38)

Company Description

Amarillo Gold Corp. (V-AGC) – October 17, 2011

2 | RESEARCH QUICK NOTE Eric Zaunscherb, CFA, B.Sc. (Geology)

Everyone Should Get a Brazilian We recently had the opportunity to visit a number of gold exploration projects in Brazil, including the Mara Rosa and Lavras do Sul projects of Amarillo Gold. The country is a superb host for gold exploration given its strong geological endowment, experienced exploration and mining community, welcoming business environment and political stability. Most of its historic gold production has been generated by artisanal gold miners, the garimpeiros, and few massive gold discoveries have been made. In our view, massive gold discoveries will, in time, be made considering the geological similarities to other prolific terranes found in Western Africa, Australia and Canada. Brazil’s endowment has yet to be tested to the same degree as those other locales. The inaccessibility and lack of infrastructure in parts of Brazil have kept vast swaths of prospective land under-explored and unexploited, apart from the untender mercies of those self-propelled geochemical samplers, the garimpeiros. These challenges have, however, created an investment opportunity as Brazil rapidly expands its infrastructure and exploration accelerates. We expect consolidation of exploration companies to ramp up as well.

Amarillo Gold is a Vancouver-based gold exploration company focused on Brazil. The Company is building a portfolio of exploration and development projects that have easy access, nearby power and skilled labour, as well as modern regional mining cultures. Management of Amarillo is headed by President and CEO Buddy Doyle, a 28-year explorationist with a stellar track record including 23 years with mega-miner Rio Tinto. He was intimately involved in the discoveries of the multi-million ounce Minifie gold deposit at Lihir, Papua New Guinea, and the Diavik diamond deposits in Northwest Territories, Canada. Mr. Doyle has built a strong team in Brazil including Luis Carlos da Silva, General Manager, and Frank Baker, Project Development Manager. Project geologists clearly respect and enjoy working with Mr. da Silva, leading to quality work and low turnover. Mr. Baker, a metallurgist, has over 30 years of experience including advancing three mines into production (Yamana's San Francisco mine in Brazil, Avocet's Intata mine in Burkino Faso, and Catalpa Resource's Edna May mine in Western Australia).

Mara Rosa Gold Project Amarillo Gold’s primary asset is the Mara Rosa gold project located in Goiás State, Brazil, approximately 320 kilometres northwest of Brasilia (Exhibit 1). The wholly-owned project consists of three mining claims covering 2,553 hectares plus 80,834 hectares of exploration permits; more have been applied for. The key mining licences nominally expired August 8 but extension is a routine matter when resources have been defined and published, consequently we expect no problems over time.

Regional infrastructure is excellent with paved road access from Brasilia, significant mines in the region and a supportive local community. Although a power line runs to the site, the Company recently learned that this power line has insufficient capacity for future operations and a new 70-kilometre power line will have to be constructed. A new railroad passes within 2 or 3 kilometres of the proposed mine site.

The Mara Rosa property covers a segment of a major northeast-trending shear structure in a Neo-Proterozoic (550 million to 1.0 billion year old) greenstone belt that passes through the property and has been traced for tens of kilometres. At Mara Rosa, the shear structure hosts the Posse deposit, the upper oxidized portions of which were mined by Western Mining from 1992 to 1995. Mineralization is hosted in schist that has been strongly sheared. Gold grades appear to increase with intensity of silicification and sulphide content (pyrite with minor chalcopyrite, pyrrhotite and galena). Posse mineralization dips approximately 45 degrees to the northwest and averages 30 metres in width. One rig is currently testing the southward extension of Posse, Posse Sul, where there appears to be a structural offset (Exhibits 2 and 3); a detailed soil geochemical survey is being conducted to guide drilling. A strong deflection is found approximately 5 kilometres south of Posse where the structure swings due west. Both of these structural features, the offset(s) and the westward deflection, are highly prospective targets offering greater exploration upside than we had anticipated prior to our visit. A second rig has been sourced and recently began drilling on site.



Exhibit 1: Amarillo Gold Corp. Project Location Map, Brazil

Source: Amarillo Gold Corp. presentation, September 2011



Exhibit 2: Mara Rosa K-Channel Airborne Gamma Survey Note the structural offset(s) south of the Posse deposit.


Exhibit 3: Mara Rosa Project Drilling at Posse Sul Note the wet depression that is likely the expression of an offsetting structure.

Source: PI Financial Corp., July 2011



Exhibit 4: Posse Deposit Resource Estimates

September 2011 (1) July 2010 (1) Δ Δ

Cut-Off Grade 0.5 g/t 0.5 g/t

MeasuredMass (t) 5,463,000 5,463,000Grade (g/t) 2.04 2.04Contained (oz) 358,300 358,300

IndicatedMass (t) 15,393,000 11,928,000 3,465,000 29%Grade (g/t) 1.65 1.62 0.03 2%Contained (oz) 816,600 623,000 193,600 31%

Measured + IndicatedMass (t) 20,856,000 11,928,000 8,928,000 75%Grade (g/t) 1.75 1.62 0.13 8%Contained (oz) 1,174,900 623,000 551,900 89%

InferredMass (t) 3,630,000 10,164,000 -6,534,000 -64%Grade (g/t) 1.34 1.38 -0.04 -3%Contained (oz) 156,400 451,000 -294,600 -65%

Global (2)Mass (t) 24,486,000 22,092,000 2,394,000 11%Grade (g/t) 1.69 1.51 0.18 12%Contained (oz) 1,331,300 1,074,000 257,300 24%

(M + I) / Global Ounces 88% 58%

Notes: 1. Australian Exploration Field Services Pty Ltd.2. Non-compliant conceptual sum of all categories.

Source: Posse Deposit Technical Report, Hoogvliet Contract Services and Australian Exploration Field Services Pty Ltd for Amarillo Gold Corp, July 2011; PI Financial Corp.

Amarillo acquired the Mara Rosa project in October 2003. Prior to 2006, previous operators had drilled 20,817 metres in 223 diamond drill, reverse circulation and percussion holes. After compiling data and preliminary surface work, Amarillo conducted a trenching program in 2006 amounting to 2,942 metres in 28 trenches. Amarillo followed the trenching program with three diamond drill campaigns to April 2011 that amounted to 15,463 metres in 74 drill holes. NI 43-101 compliant resource estimates for the Posse deposit were generated by independent consultants to Amarillo and published in February 2008, July 2010 and September 2011. The most recent resource estimate, released 13 September, is summarized in Exhibit 4 along with changes relative to the previous estimate. It is noteworthy that the 2010 – 2011 drill program successfully increased the confidence level of the resource (88% of global resource ounces in the measured + indicated categories), the number (+89%) and grade (+8%) of measured + indicated ounces, and the number (+24%) and grade (+12%) of global ounces.

Amarillo filed a Preliminary Economic Assessment (PEA) for the Posse deposit authored by Caracle Creek International Consulting Inc. in March 2008. The study envisaged a 9.2-year 2 Mt/a open pit operation with a 4.3:1 waste to ore ratio at a base case US$800/oz gold. A gold recovery rate of 80% was assumed for Carbon-in-Leach (CIL) processing. The initial capital cost was estimated at $80.0 million. The base case yielded a NPV(5%) of $103.4 million. The study recommended conducting additional exploration, metallurgical studies to increase the gold recovery rate and proceeding to the prefeasibility study stage.

In July 2010 Amarillo filed an updated resource estimate and PEA, authored by Hoogvliet Contract Services and Australian Exploration Field Services Pty Ltd. The updated PEA revisited the 2008 PEA continuing with the concept of an open pit operation supplying a CIL plant but employing a US$850/oz base case. The project resource was updated as were capital cost estimates amounting to $88.5 million pre-production followed by $11.5



million in year three for a mining fleet upgrade. Under the 2010 base case, a twelve-year operation was projected with a 4.4:1 strip ratio yielding a NPV(5%) of $197.5 million. Gold production was projected at 67,000 oz/a at the base case. Principal recommendations included infill drilling, exploration and geotechnical drilling, metallurgical studies to increase the gold recovery rate and proceeding to the prefeasibility study stage.

In May 2011 Amarillo filed a report from Coffey Mining Pty Ltd on metallurgical test work, part of the prefeasibility study in progress. Test work indicated the presence of a free milling component of gold of approximately 75%; the remainder appears refractory with gold associated with sulphides and tellurides. This characterization explains the moderate 80% recovery rate in earlier leach tests. Fortunately it was found that grinding to 80% passing 45 microns and adding a 12-hour pre-oxidation stage a) reduced leach time to 24 hours, b) reduced cyanide consumption to 0.26 kg/t, and c) increased the gold recovery rate to greater than 93% from 80%. It is believed that additional optimization may reduce plant residence time further. We believe that these refinements to the prefeasibility study will have a very positive impact on the economics of the project only minimally offset by increased capital and operating costs. The prefeasibility study, expected near-term, should also benefit from the higher measured + indicated grade and a potential increase in throughput rate. We expect significant capital cost creep, given the time that has passed (and resultant inflation), the unexpected power line cost (although financeable in Brazil at a favourable rate) and the stronger Brazilian Real, potentially to over $150 million if self-mining is selected over contract mining. With the new parameters outlined, we will be looking for an operation delivering over 100,000 oz/a.

On our site visit, we ran through Posse on 25-metre sections and mineralization is reasonably continuous down-hole and between sections. Most of the current resource lies within 200 metres of surface. Additional exploration to depth may not be purposeful, limited by an increasing strip ratio. In our view, exploration will be most productive along strike, particularly to the south where the tantalizing flexure of the main structure is interpreted based on coincident magnetic and radiometric anomalies. In addition we consider parallel imbricate structures to the east prospective. As noted earlier, we consider the exploration upside at Mara Rosa better than we expected with the potential to host over 2 million ounces. As Amarillo de-risks Mara Rosa and demonstrates this potential, the Company and/or the project will become likely targets for growth-oriented mid-tier gold producers.

Lavras do Sul Gold Project If one views Mara Rosa as the anchor project for Amarillo, then Lavras do Sul certainly provides the exploration “blue sky”. The 19,000-hectare project in Rio Grande do Sul covers a 10 by 10 kilometre intrusive (Exhibit 5). Historical mining dates back to the 1780s with over 19 garimpos identified. The town of Lavras do Sul, with approximately 8,000 inhabitants, occupies the centre of the intrusive. Mineralization is dispersed around the intrusive, so we expect no major land use conflicts. Most of the surrounding land is scrub-covered and used for cattle grazing. Infrastructure is excellent with a paved road directly to Lavras, grid power available and a mining-savvy population nearby. On our site visit we noted project geologists using their personal vehicles to visit drill sites.

The Lavras do Sul intrusive suite was emplaced into a belt of 540 million to 1,000 million year old terranes compressed and partially subducted to the east between the South American Rio del Plata Craton and the African Kalahari Craton. The intrusive suite consists of a monzonite to granodiorite core surrounded by perthitic granite. A number of targets, some corresponding with old garimpos, have been identified based on geochemical and geophysical anomalies. Gold mineralization appears to be associated with brittle east-west structures and attendant alteration zones, many of which remain untested.

Exhibit 5: Lavras do Sul Project Map, Brazil




At this point, the Lavras do Sul concept entails identifying sufficient resources in near surface deposits capable of feeding a central mill facility. Geologists are working hard to identify controls on mineralization and metal zonations within the intrusive complex. This may guide toward recognition of the centre-of-gravity of the mineralizing system and generation of further exploration targets. In general, one sees more bulk-style mineralization in the west and higher-grade vein-style mineralization to the east, which may suggest that the heat engine resides to the east but we are in early innings.

The first target to be drill-tested was Butiá. Most gold mineralization at Butiá appears to be predominantly associated with the final of three phases of alteration and mineralization as sulphides and gold precipitated in brecciating veins and veinlets in a microbrecciated episyenite (Exhibit 6). Amarillo commissioned Atticus Consulting SAC (Atticus) of Lima Peru to generate the initial resource estimate for Butiá. Atticus employed ordinary kriging to estimate an indicated resource of 6.39 million tonnes grading 1.05 g/t (215,000 oz) at a 0.3 g/t cut-off grade plus an inferred resource of 12.88 million tonnes grading 0.74 g/t (308,000 oz), effective 30 July 2010. To July 2011, 55 holes have been drilled amounting to approximately 13,500 metres. New data will feed into an updated resource estimate for Butiá, expected early in 2011. Based on our review of data and drill sections we expect a moderate expansion with a considerable category upgrade as well. More drilling is required to test the continuity of higher grade subzones, which could potentially be very impactful. Butiá appears to be situated at a flexure of the dominant east-west structure or at an intersection with a secondary north-south structure. Preliminary metallurgical studies are suggesting an 83% recovery rate with room to optimize and improve.

Exhibit 6: Sulphide and gold bearing veinlet in microbrecciated episyenite at Butiá



Source: PI Financial Corp., July 2011

Exhibit 7: Matilde Drill Target, High Gold-in-Soil Geochemical Anomaly


Exhibit 8: Lavras do Sul Project Ownership




The second target to be tested was Cerrito where 45 holes had been drilled to the end of July, amounting to 9,460 metres. Gold mineralization appears to be associated with sericite-pyrite-chalcopyrite veins and veinlets but a number of other metals are also present suggesting a higher temperature. We expect a relatively small initial inferred resource (perhaps 250,000 oz) to be defined in early 2012.

Drilling has also been conducted at Cerro Rico, where a channel sampling program returned 15.6 g/t gold and 46% of the samples returned gold grades higher than 0.3 g/t., as well as the Valdo Teixeira target; assays are pending. Drilling has commenced on the Matilde target located approximately 2.5 kilometres south of the town of Lavras do Sul (Exhibit 7). The Matilde target is highlighted by a very strong and extensive geochemical soil anomaly with coincident structures interpreted from geophysics. The target has not been disturbed by artisanal workings. Given the geological setting and scale of the geochemical anomaly, we are excited by its potential and look forward to results from the ongoing drill program.

Property ownership is the greatest complication we can see with regard to the Lavras do Sul project (Exhibit 8). The first level of complication relates to the earn-in and back-in rights on project’s ownership. Between 1980 and 1990 the Companhia Brasileira do Cobre (CBC) carried out detailed surface exploration and drilling at Lavras do Sul, largely at Butiá and Cerrito. From 2003 to 2006, Rio Tinto Desenvolvimentos Minerais Ltda. (RTDM), a wholly-owned subsidiary of Rio Tinto, and IAMGOLD (T-IMG, Not Covered) carried out exploration in the Lavras do Sul district. During this period RTDM consolidated the mineral title in the area through staking and options with underlying title owners including CBC and Maria Lucia Vidal. In October 2006 Amarillo entered into an option agreement with RTDM, after an open competitive bid. Amarillo has met the prerequisites of the agreement to date. Amarillo has taken over the RTDM landholdings and underlying option agreements. The terms of these options have been met and Amarillo is in the process of forming formal joint venture agreements with the various mineral right owners. Amarillo has earned an initial 60% interest in the project. If the other parties elect not to contribute to a joint venture, then Amarillo will earn a 100% interest and be required to pay a 1.5% Net Smelter Return (NSR) Royalty on production. Amarillo will make a US$1 million payment to Rio Tinto within 90 days of a bankable feasibility study being delivered and a US$6.5 million payment for every one million ounces of recoverable gold reserves that is covered by the 60% equity in the project over which Rio Tinto have an option. Finally, Rio Tinto will have a back-in-right to acquire 70% of the Amarillo interest in the project by paying Amarillo three times their exploration expenditure in the event that Amarillo's equity interest in the Property contains in excess of 7 million ounces of recoverable gold – a condition that we consider highly unlikely, not necessarily for geological reasons but rather strategic.



Amarillo may also earn a 51% interest in the IAMGOLD project grounds by expending US$800,000 on exploration over 3 years, which will include a minimum of 2,000 metres of drilling, of which US$200,000 must be spent within the first 12-month period. Amarillo has made the US$200,000 milestone expenditure and is currently drilling on the IAMGOLD ground. In the event that IAMGOLD elects not to contribute pro-rata funding after the first earn-in period then Amarillo may earn a further 29% interest (for a total of 80%) by funding any mineral resource discovered on the project through to feasibility study. At the completion of a feasibility study on the project, and up to a period of 60 days from this date, IAMGOLD may either elect to contribute its pro-rata share to future funding, dilute its interest to a 2.0% NSR (of which 1.0% may be bought back by Amarillo for US$1 million), or exercise a one-time back-in right to increase its participating interest to 60% if Amarillo has established a total mineral reserve in excess of 2.5 million ounces of gold on the project. In the case of the latter option, IAMGOLD may become operator by paying three times Amarillo’s exploration costs up to the date of IAMGOLD exercising its back-in right. Given IAMGOLD’s recent focus on majority project interests, we consider it unlikely that the senior would exercise its back-in right unless the project’s scale were to become particularly compelling.

On the second level of complication, Lavras do Sul is situated within the 150 kilometre Faixa de Fronteira, a border zone with restrictions on ownership. The Federal Law 6634/79 of 2 May 1979 sets out special requirements for companies to do business in border zones including mining companies. Enterprises within the border zone must be owned 51%, directly, or indirectly, by Brazilian citizens. Where a minority party is funding project development separate shareholder agreements may be enacted. Numerous foreign entities (mines, forestry, manufacturing, etc.) operate creatively in this zone without difficulty. A bill has also been passed through the Senate, which would reduce the border zone to 50 kilometre leaving Lavras do Sul ownership unrestricted. We have no idea of when or if the bill might pass through Brazil's Lower House but this would be an important catalyst.

With regard to primary catalysts related to Lavras do Sul, these include results from drill programs (initial at Cerro Rico, Valdo Teixeira and Matilde, infill at Butiá and Cerrito) and upcoming resource estimates for Butiá and Cerrito. We see little difficulty in exceeding a 1 million ounce resource target over the next twelve months, with over property potential well in excess of 2 million ounces.

Corporate Amarillo is well-positioned financially having completed a private placement this past summer, issuing 6.7 million units at $1.50 per unit for total gross proceeds of $10.0 million. Each unit consisted of one common share and one half share purchase warrant, with each whole warrant exercisable to acquire one additional common share at $2.00 per common share for a period of 18 months. The private placement consisted of two tranches. The first tranche closed on 29 April 29 2011 and 5.6 million units were issued for gross proceeds of $8.37 million. The second and final tranche closed on 4 May 2011 and consisted of 1.1 million units for gross proceeds of $1.67 million.

Management is well-backed by a strong board of directors. Robert Landis is the Chairman of the board. He is a member of Golden Sextant advisors and President and co-founder of Northern Lights Investors LLC, a private investment company with principal and agency business in Poland. Since June 1994 Mr. Landis has been involved in private investment activities based in Boston, and has served as a director of several Canadian mining companies. Richard Brown is a director, as well as being responsible for business development. He is an experienced geologist resident in Brazil and manages the Company’s exploration activities. For the last 12 years he has lived in South America, establishing local companies and acquiring a portfolio of mining properties in Ecuador, Peru, Argentina and Brazil. The board is rounded out by Patrick Power, a seasoned venture capitalist and financier with over 15 year’s of financial industry experience; Michael Durose, a Professional Geoscientist (P.Geo.) registered in the Province of Ontario and former senior mining analyst with Morgan Stanley, Bunting Warburg (now UBS Canada), Nesbitt Burns (now BMO Capital Markets), and Scotia Capital; and Todd Bruce, who brings extensive operational and development experience and has held senior management and board positions with Anglo Platinum, IAMGold Corporation and Crystallex.

Amarillo’s competitive strength remains project generation and so it is not surprising that Amarillo has a number of interesting projects in the hopper, all conforming to the theme of prospectivity with superior infrastructure. In our view, the Company has the capacity to accelerate its programs, which would send a positive signal to the market. The original corporate philosophy (small programs supported by small private placements with a small circle of investors) has provided a good start to the Company and maintained an appealing capital structure. There is recognition, however, that accelerated programs, additional liquidity and access to deeper pockets of capital are desirable. To this end Amarillo has embarked on a number of initiatives including institutional marketing and greater attention to retail-oriented marketing including attendance at key industry conferences.



Amarillo is trading attractively on an enterprise value per ounce basis at $39 as compared to the adjusted mean of $64 for the broad exploration and development peers that we track (Exhibit 9).

Exhibit 9: Gold Exploration and Development In Situ Metrics

Gold Exploration and Development CompaniesEric Zaunscherb, [email protected]

October 17, 2011

Price Shares

O/SMC (2)

WC (3)

EV (4) Project

Gold Exposure

(7)Company Ticker (1) (M) (C$M) (C$M) (C$M) Location(s) Au AuEq (5) Au AuEq Au AuEq (%) Au AuEqAmarillo Gold Corp. TSXV:AGC $1.31 56.1 $77.5 $7.7 $69.7 Brazil 1.4 1.4 $56 $56 1.8 1.8 100% $39 $39American Bonanza Gold Corp TSX:BZA $0.53 191.7 $101.6 $12.1 $88.6 Arizona 0.5 0.5 $193 $193 0.8 0.8 100% $112 $112Andina Minerals Inc. TSXV:ADM $0.78 110.5 $89.5 $14.4 $71.9 Chile 9.0 9.0 $10 $10 10.4 10.4 100% $7 $7Atacama Pacific Gold Corporation TSXV:ATM $4.07 47.0 $197.6 $20.8 $176.5 Chile 1.6 1.6 $123 $123 3.6 3.6 100% $50 $50Auriga Gold Corp. TSXV:AIA $0.37 38.5 $13.5 $1.3 $12.2 Manitoba 0.2 0.2 $78 $78 0.7 0.7 100% $17 $17Banro Corporation TSX:BAA $4.26 192.7 $828.4 $44.4 $770.2 DRC 6.8 6.8 $121 $121 11.2 11.2 100% $69 $69Bear Lake Gold Ltd. TSXV:BLG $0.11 136.4 $13.6 $0.3 $13.1 Quebec 0.0 0.0 $311 $311 0.3 0.3 100% $47 $47Belo Sun Mining Corp TSXV:BSX $1.21 207.2 $250.7 $50.0 $198.8 Brazil 1.3 1.3 $192 $192 3.4 3.4 100% $58 $58Bravo Gold Corp. TSXV:BVG $0.08 202.7 $15.2 $2.2 $13.0 British Columbia 0.2 0.2 $79 $70 0.7 1.0 72% $18 $13Calibre Mining Corp. TSXV:CXB $0.13 167.0 $18.4 $0.6 $17.6 Nicaragua 0.0 0.0 0.8 0.9 91% $21 $19Canarc Resource Corp. TSX:CCM $0.13 93.6 $12.2 $0.1 $11.5 British Columbia 0.5 0.5 $27 $27 1.0 1.0 100% $11 $11Carpathian Gold Inc. TSX:CPN $0.50 428.3 $214.2 $23.2 $186.9 Brazil & Romania 4.0 5.6 $53 $38 8.5 11.4 75% $22 $16Cerro Resources NL ASX:CJO $0.15 748.8 $113.1 $18.3 $93.6 Mexico 1.1 1.6 $103 $73 1.1 1.6 71% $85 $60Chesapeake Gold Corp. TSXV:CKG $14.51 39.8 $582.5 $12.7 $568.3 Mexico 17.2 27.9 $34 $21 19.8 31.9 62% $29 $18Continental Gold Limited TSX:CNL $7.10 107.7 $801.1 $94.8 $702.7 Colombia 0.6 0.7 $1,261 $1,189 3.2 3.4 92% $222 $205Corvus Gold Inc. TSX:KOR $0.55 41.7 $23.7 $7.2 $16.4 Nevada 0.2 0.2 $131 $128 1.6 1.7 95% $10 $10Dalradian Resources Inc. TSX:DNA $1.95 70.4 $140.1 $26.6 $113.0 Northern Ireland 0.4 0.4 $346 $346 1.6 1.6 100% $72 $72Detour Gold Corporation TSX:DGC $28.65 98.7 $2,859.0 $595.7 $2,589.9 Ontario 20.5 20.5 $139 $139 25.7 25.7 100% $101 $101East Asia Minerals Corporation TSXV:EAS $0.65 78.0 $50.7 $5.7 $45.0 Indonesia 0.0 0.0 2.7 2.8 95% $17 $16Eastmain Resources Inc. TSX:ER $1.24 95.0 $114.0 $14.8 $97.5 Quebec 0.6 0.6 $180 $180 1.7 1.7 100% $58 $58Eco Oro Minerals Corp TSX:EOM $2.19 84.2 $182.8 $69.5 $104.7 Colombia 11.6 12.7 $16 $14 15.0 16.5 91% $7 $6Edgewater Exploration Ltd. TSXV:EDW $0.45 66.7 $30.3 $13.0 $12.8 Spain & Ghana 0.3 0.3 $95 $95 1.5 1.5 100% $9 $9Euromax Resources Ltd. TSXV:EOX $0.23 147.9 $35.5 $7.5 $28.6 Bulgaria, Macedonia & Serbia 0.0 0.0 5.6 8.8 64% $5 $3Extorre Gold Mines Limited TSX:XG $8.09 92.1 $770.7 $22.4 $745.6 Argentina 1.1 1.6 $703 $494 1.5 2.2 69% $505 $347Fire River Gold Corp. OTCPK:FVGC.F $0.34 99.2 $35.2 $7.2 $27.3 Alaska 0.1 0.1 $335 $335 0.2 0.2 100% $162 $162Gabriel Resources, Ltd. TSX:GBU $6.74 379.4 $2,595.3 $166.5 $2,419.0 Romania 14.9 16.1 $175 $161 16.0 17.3 93% $151 $140Gold Canyon Resources Inc. TSXV:GCU $2.46 10.6 $27.0 $12.0 $14.6 Ontario 0.0 0.0 $596 $596 0.2 0.2 100% $60 $60Golden Queen Mining Co. Ltd. TSX:GQM $3.23 95.5 $296.9 $5.1 $291.0 California 2.2 2.9 $137 $103 2.7 3.6 74% $109 $80Goldgroup Mining Inc. TSX:GGA $1.28 120.5 $160.3 $45.5 $120.9 Mexico 0.3 0.3 $519 $506 1.2 1.3 95% $100 $95Grayd Resource Corp. TSXV:GYD $2.50 91.2 $231.7 $4.4 $228.6 Mexico 0.8 0.8 $305 $305 1.3 1.3 100% $181 $181Guyana Goldfields Inc. TSX:GUY $8.14 83.7 $703.0 $51.8 $648.5 Guyana 5.3 5.3 $132 $132 6.7 6.7 100% $97 $97Helio Resource Corp. TSXV:HRC $0.34 105.0 $36.7 $5.7 $29.6 Tanzania & Namibia 0.6 0.6 $64 $64 0.9 0.9 100% $33 $33Huakan International Mining Inc. TSXV:HK $0.60 37.1 $22.3 $3.3 $23.0 British Columbia 0.5 0.8 $43 $28 1.3 2.0 64% $18 $11Integra Gold Corp. TSXV:ICG $0.20 41.9 $8.0 $1.5 $6.8 Quebec 0.1 0.1 $78 $78 0.5 0.5 100% $14 $14Inter Citic Minerals Inc. TSX:ICI $1.10 117.6 $129.3 $2.5 $126.5 China 1.9 1.9 $69 $69 3.8 3.8 100% $33 $33International Tower Hill Mines Ltd. TSX:ITH $5.11 86.7 $457.7 $108.4 $345.9 Alaska 16.5 16.5 $28 $28 20.6 20.6 100% $17 $17Keegan Resources Inc. TSX:KGN $5.48 75.3 $417.9 $216.2 $198.7 Ghana 3.3 3.3 $128 $128 4.9 4.9 100% $41 $41Kilo Goldmines Ltd. TSXV:KGL $0.22 105.3 $21.1 $5.8 $15.1 Ghana 3.3 3.3 $6 $6 4.9 4.9 100% $3 $3Kimber Resources Inc. TSX:KBR $1.42 77.2 $108.8 $7.7 $100.4 Mexico 0.5 0.9 $213 $122 0.9 1.5 61% $112 $68Klondex Mines Ltd. TSX:KDX $2.51 37.0 $92.2 $10.9 $87.5 Nevada 1.6 1.6 $56 $56 2.1 2.1 100% $41 $41Laurion Mineral Exploration Inc. TSXV:LME $0.07 82.4 $5.8 $1.0 $4.5 Nevada 0.2 0.3 $35 $21 0.2 0.3 61% $23 $14Lydian International Limited TSX:LYD $2.47 99.4 $261.3 $16.2 $241.8 Armenia 1.1 1.1 $228 $228 2.5 2.5 100% $95 $95Magellan Minerals Limited TSXV:MNM $0.60 107.1 $64.3 $16.3 $45.8 Brazil 0.4 0.4 $168 $168 1.7 1.7 100% $27 $27Malbex Resources Inc. TSXV:MBG $0.30 125.1 $36.3 $17.1 $18.6 Argentina 0.0 0.0 0.8 1.0 80% $23 $18Mansfield Minerals Inc. TSXV:MDR $1.30 50.9 $69.2 $6.6 $62.3 Argentina 2.2 2.2 $31 $31 3.0 3.0 100% $21 $21Midway Gold Corp. TSXV:MDW $2.26 112.2 $260.3 $14.5 $245.0 Nevada 0.9 0.9 $306 $306 2.6 2.6 100% $94 $94North Country Gold Corp. TSXV:NCG $0.90 97.2 $89.4 $11.8 $71.5 Nunavut 0.5 0.5 $176 $176 0.8 0.8 100% $95 $95Northern Dynasty Minerals Ltd. TSX:NDM $7.42 95.0 $721.8 $44.7 $680.3 Alaska 33.4 117.6 $22 $6 53.6 183.5 29% $13 $4Northern Gold Mining Inc. TSXV:NGM $0.28 145.1 $42.1 $2.1 $39.8 Ontario 0.2 0.2 $201 $201 1.0 1.0 100% $40 $40NovaGold Resources Inc. TSX:NG $7.62 239.7 $1,800.2 $63.6 $2,126.9 Alaska & BC 23.0 38.5 $78 $47 27.3 50.0 55% $78 $43Orezone Gold Corporation TSX:ORE $3.34 83.4 $292.8 $47.9 $244.4 Burkina Faso 2.3 2.3 $126 $126 4.5 4.5 100% $55 $55Oromin Explorations Ltd. TSX:OLE $0.89 135.6 $134.2 $11.7 $122.5 Senegal 1.2 1.2 $109 $109 1.4 1.4 100% $89 $89Pacific Rim Mining Corporation TSX:PMU $0.18 168.6 $28.7 $2.3 $24.9 El Salvador 1.3 1.5 $22 $19 1.6 1.8 88% $16 $14Paramount Gold and Silver Corp. AMEX:PZG $2.43 136.3 $351.2 -$0.7 $335.9 Nevada & Mexico 2.7 3.4 $129 $105 4.6 6.0 76% $73 $56PC Gold Inc. TSX:PKL $0.49 66.8 $34.7 $9.6 $25.1 Ontario 0.0 0.0 1.3 1.3 100% $20 $20Perseus Mining Ltd. ASX:PRU $3.25 426.7 $1,444.4 $50.0 $1,420.6 Ghana & Ivory Coast 9.7 9.7 $148 $148 11.9 11.9 100% $119 $119Premier Gold Mines Limited TSX:PG $5.10 121.9 $649.7 $28.0 $626.3 Ontario, Nevada & Mexico 1.7 1.7 $373 $373 2.5 2.5 100% $248 $248Premium Exploration, Inc. TSXV:PEM $0.30 130.4 $38.5 $6.1 $32.3 Idaho 0.3 0.3 $112 $112 1.2 1.2 100% $26 $26Pretium Resources Inc. TSX:PVG $9.58 86.9 $833.9 $35.3 $797.6 British Columbia 34.1 48.3 $24 $17 55.7 78.2 71% $14 $10Probe Mines Limited TSXV:PRB $2.10 56.7 $116.2 $24.7 $90.9 Ontario 0.3 0.3 $380 $372 4.1 4.2 98% $22 $22Prodigy Gold Inc. TSXV:PDG $0.63 237.5 $149.6 $32.0 $117.7 Ontario 2.0 2.0 $73 $73 2.7 2.7 100% $43 $43Queenston Mining Inc. TSX:QMI $5.80 82.5 $466.1 $69.1 $395.1 Ontario 1.7 1.7 $280 $268 3.8 4.0 97% $103 $100Rainy River Resources Ltd. TSX:RR $6.88 83.8 $600.8 $121.0 $475.9 Ontario 4.1 4.3 $146 $140 4.6 4.8 96% $103 $99Rio Alto Mining Limited TSXV:RIO $2.67 168.8 $450.6 $19.7 $439.5 Peru 3.0 6.6 $150 $68 4.3 10.3 42% $103 $43Rio Novo Gold Inc. TSX:RN $0.72 113.1 $84.8 $45.6 $35.1 Brazil & Colombia 0.7 0.7 $129 $125 1.6 1.6 99% $22 $21Romarco Minerals Inc. TSX:R $1.12 503.3 $578.8 $55.3 $517.6 South Carolina 3.2 3.2 $182 $182 4.3 4.3 100% $121 $121Rubicon Minerals Corporation TSX:RMX $3.46 236.2 $838.7 $24.7 $806.0 Ontario 0.5 0.5 $1,750 $1,750 2.8 2.8 100% $289 $289Rye Patch Gold Corp. TSXV:RPM $0.40 124.9 $48.7 $7.5 $41.1 Nevada 1.0 1.2 $50 $42 3.0 3.8 80% $14 $11Sabina Gold & Silver Corp. TSX:SBB $3.39 160.3 $564.4 $136.5 $422.5 Nunavut 3.5 10.0 $160 $56 5.1 13.6 37% $83 $31Sandspring Resources Ltd. TSXV:SSP $1.57 108.4 $170.2 $25.8 $140.8 Guyana 3.5 4.2 $48 $41 8.4 9.6 88% $17 $15Seabridge Gold, Inc. TSX:SEA $23.23 42.4 $998.1 $58.1 $934.8 BC, NWT, Nevada & Oregon 55.3 90.2 $18 $11 75.7 123.1 62% $12 $8Sheltered Oak Resources Corp TSXV:OAK $0.04 89.7 $3.6 $1.0 $2.2 Ontario 0.0 0.0 0.4 0.4 100% $6 $6St. Eugene Mining Corp. Ltd. TSXV:SEM $0.12 120.2 $13.8 $3.5 $9.9 Saskatchewan & Manitoba 0.4 0.5 $33 $30 0.9 0.9 93% $11 $11Sulliden Gold Corporation Ltd. TSX:SUE $1.71 212.5 $369.7 $36.8 $332.2 Peru 2.0 2.5 $186 $146 3.4 4.7 73% $97 $71Sutter Gold Mining Inc. TSXV:SGM $0.20 105.4 $21.6 -$6.8 $28.0 California 0.1 0.1 $355 $355 0.2 0.2 100% $148 $148Terraco Gold Corp. TSXV:TEN $0.26 126.1 $30.3 $3.3 $27.0 Idaho 0.8 0.8 $36 $36 0.9 0.9 100% $29 $29Timberline Resources Corp. AMEX:TLR $0.62 61.2 $42.8 $0.3 $44.5 Nevada 0.3 0.3 $145 $145 0.5 0.5 100% $91 $91Torex Gold Resources Inc TSX:TXG $1.30 350.2 $455.3 $47.0 $408.8 Mexico 2.6 2.6 $172 $172 3.3 3.3 100% $123 $123Treasury Metals Inc. TSX:TML $0.97 47.7 $47.7 $2.4 $44.0 Ontario & Peru 0.5 0.5 $88 $88 1.9 1.9 100% $23 $23Trelawney Mining and Exploration Inc. TSXV:TRR $3.55 153.5 $546.6 $85.6 $459.9 Ontario 0.0 0.0 4.2 4.2 100% $109 $109Tyhee Gold Corp. TSXV:TDC $0.11 293.7 $29.4 $1.9 $27.8 NWT 1.9 1.9 $15 $15 2.2 2.2 100% $13 $13US Gold Corporation NYSE:UXG $4.00 139.8 $611.1 $87.1 $553.2 Mexico & Nevada 3.4 4.1 $179 $147 3.8 4.9 77% $147 $113Victoria Gold Corp. TSXV:VIT $0.52 277.0 $135.7 $15.7 $117.2 Yukon & Nevada 4.9 4.9 $28 $28 7.8 7.8 100% $15 $15Vista Gold Corp. AMEX:VGZ $3.43 71.2 $256.3 $32.2 $221.7 Australia, Mexico & Idaho 13.1 13.1 $20 $20 18.0 18.0 100% $12 $12Volta Resources Inc. TSX:VTR $1.26 133.9 $172.8 $22.2 $148.6 Burkina Faso 3.0 3.0 $57 $57 4.3 4.3 100% $35 $35Yorbeau Resources Inc. TSX:YRB.A $0.18 164.0 $28.7 $1.6 $27.4 Quebec 0.0 0.0 $595 $595 0.2 0.2 100% $132 $132

Mean (C$) $186 $174 $68 $61Mean (US$) $183 $172 $67 $60Mean (Less outliers, C$) $168 $156 $64 $58Mean (Less outliers, US$) $CADUSD $1.02 $166 $154 $63 $58

Notes: 1. Priced in local currency.2. Market Capitalization.3. Working Capital.4. Enterprise Value = MC + LT Debt - WC.5. AuEq = gold equivalent on a gross basis (no recovery factors) using current spot metal prices.6. Global resources (not a compliant measure) include 43-101 compliant Measured, Indicated and Inferred resources.7. Gold exposure = percentage of silver equivalent global resource that is silver.

Global EV/ozMeasured + Indicated

Resources (Moz) M+I EV/ozGlobal Resources

(Moz) (6)

Source: Capital IQ, company news releases and PI Financial Corp.



Disclosure Fact Sheet Ratings BUY : recommendation: stock is expected to appreciate from its current price level at least 10-20% in the next 12 months. NEUTRAL : recommendation: stock is expected to trade in a narrow range from its current price level in the next 12 months. SELL : recommendation: stock is expected to decline from its current price level at least 10-20% in the next 12 months. U/R : Under Review N/R : No Rating Analyst recommendations and targets are based on the stock’s expected return over a 12-month period or may be based on the company achieving specific fundamental results. Under certain circumstances, and at the discretion of the analyst, a recommendation may be applied for a shorter time period. The basis for the variability in the expected percentage change for a recommendation, relates to the differences in the risk ratings applied to individual stocks. For instance stocks that are rated Speculative must be expected to appreciate at the high end of the range of 10-20% over a 12-month period.

Price Volatility / Risk SPECULATIVE : The Company has no established operating revenue, and/or balance sheet or cash flow concerns exist. Typically low public float or lack of liquidity exists. Rated for risk tolerant investors only. ABOVE AVERAGE : Revenue and earnings predictability may not be established. Balance sheet or cash flow concerns may exist. Stock may exhibit low liquidity. AVERAGE : Average revenue and earnings predictability has been established; no significant cash flow/balance sheet concerns are foreseeable over the next 12 months. Reasonable liquidity exists. Price Volatility/Risk analysis while broad based includes the risks associated with a company’s balance sheet, variability of revenue or earnings, industry or sector risks, and liquidity risk

Analyst Certification I, Eric Zaunscherb, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this report. I am the research analyst primarily responsible for preparing this report.

Research Disclosures Applicability 1) PI Financial Corp. and its affiliates’ holdings in the subject company’s securities, in aggregate exceeds 1% of each company’s issued and outstanding securities.

1) No

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5) PI Financial Corp. and/or its affiliates have managed or co-managed a public offering of securities for the subject company in the past 12 months.

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8) PI Financial Corp. and/or its affiliates makes a market in the securities of the subject company. 8) No 9) Company has partially funded previous analyst visits to its projects. 9) Yes 10) Additional disclosure: 10) No

General Disclosure The affiliates of PI Financial Corp. are PI Financial (US) Corp., PI Financial Services Corp., and PI Capital Corp. Analysts are compensated through a combined base salary and bonus payout system. The bonus payout is amongst other factors determined by revenues generated directly or indirectly from various departments including Investment Banking. Evaluation is largely on an activity-based system that includes some of the following criteria: reports generated, timeliness, performance of recommendations, knowledge of industry, quality of research and investment guidance, client feedback. Analysts are not directly compensated for specific Investment Banking transactions. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of PI Financial Corp. PI Financial Corp.’s policies and procedures regarding dissemination of research, and stock rating and target changes can be reviewed on our corporate website at www.pifinancialcorp.com (Research: Research and Conflict Disclosure) The attached summarizes PI’s analysts review of the material operations of the attached company(s):

Analyst Company Type of Review Operations / Project Date

Eric Zaunscherb Amarillo Gold Corp. Site Visit Lavras do Sul, Brazil 22 July 2011 Eric Zaunscherb Amarillo Gold Corp. Site Visit Mara Rosa, Brazil 24 July 2011

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For further disclosure information, reader is referred to the disclosure section of our website. PI Financial Corp. Member-Canadian Investor Protection Fund, TSX, TSX-V, Montreal Exchange, IIROC, and International Financial Centre (British Columbia) PI Financial (US) Corp. Member-Securities Investor Protection Corporation, FINRA, International Financial Centre (British Columbia) Estimates and projections contained herein are our own and are prepared by PI Financial Corp based on assumptions, which we believe to be reasonable. The material contained herein is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. While the information herein cannot be guaranteed, it was obtained from sources believed to be reliable, but in providing it, PI Financial Corp. and its subsidiary PI Financial (US) Corp. (collectively "PI Financial") do not assume any liability. This information is given as of the date appearing on this report, and PI Financial assumes no obligation to update the information or advise on further developments relating to securities. PI Financial and/or its’ officers, directors, employees and affiliates may, from time to time, acquire, hold or sell a position in the securities mentioned herein. This report is intended for distribution in those jurisdictions where PI Financial is registered as an advisor or a dealer in securities. Any distribution or dissemination of this report in any other jurisdiction is strictly prohibited.

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