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Basking in the Desert Sun Tony Bortolin bortolin@pathcom.com January 9, 2004 Joe Investor here. It's early January 2004, freezing cold outside, and I have just received the 2003 Annual Report for Desert Sun Mining, symbol DSM on the TSX. In short, if you haven't seen it yourself, the following are some excerpts and information from the foreword that seem to say it all: Desert Sun Mining is a gold exploration and development company that owns 100% of one of the largest gold belts in Brazil - the Bahia Gold Belt. The property can be discussed in two parts: The first part represents less than 10% of the total property. It hosts three past producers, collectively known as the Jacobina Mines. "The three mines and the surrounding area host of 1.4 million ounces of gold resources in the measured and indicated category (14.8 million tonnes at 2.86 g Au/t) and an additional 2.5 million ounces in the inferred category (29.5 million tonnes at 2.62 g Au/t). "Following the completion of a bankable feasibility study by SNC Lavalin on the measured and indicated resources of 1.4 million ounces, Desert Sun is now reopening the existing mines and reactivating the processing plants and expects to be at full production by 2005 at 102,000 ounces per year and a cash cost of US$189 per ounce." In particular: "By 2005, the Company will be in full production and will generate between $15 to $20 million in free cash flow per year from the operation." A separate source (the TSX web site) indicates that the company currently has about 56 million shares. Working with that figure, $15 million in free cash flow divided by 56 million shares would thus equate to a cash flow of about 27 cents per share. That might even be in U.S. funds. It also seems the estimate of $15 million in free cash flow assumes an average price of gold of US$350 per ounce. The estimate of $20 million in free cash flow assumes a price of gold of US$400 per ounce. In that case, $20 million divided 56 million shares would equate to a cash flow of about 36 cents per share. Obviously, there are many other variables (and please recall I don't give any advice; I'm just a private investor trying to share thoughts and information). For now, things look pretty good to me as the price of gold is over US$420. So, estimated cash flow of 27 cents to 36 cents or more (perhaps in US$) based on gold at US$350 to $400 and gold is already over US$420, and the current price of the stock is only about $1.70CDN? And that's not the whole story Then we come to the remaining 90% of the property. The company has already conducted some drilling and continues to do so. In short, in the words of the company, there are three target areas alone that have produced "spectacular results." In fact, one of the company's goals for 2004 is to: "Increase our mineable reserves to at least 2 million ounces and significantly increase our total resources." Based on our exploration results to date, we believe this is easily achievable." And again, that is a goal just for the year 2004. It seems the company could increase its resources in future years as the company also plans, in 2004, to conduct broad exploration along the rest of the 110 kilometer-long gold belt (which is again 100% owned by the company) "to demonstrate its potential as one of the longest gold bearing belts in the world." The company also suggests it is now well-financed ("strong balance sheet"), having recently raised some funds with new shares. This may explain the price action over the last few months. Since the number of shares has been increased, it appears the overall capitalization of the stock has actually been increasing. With no new shares expected for many months, if ever, then any further increase in the capitalization would have to be reflected as an increase in the price per share. According to the annual report, another company goal for 2004 is to obtain a listing on a U.S. Exchange. So it seems to me that the company is doing well and "basking in the Desert Sun." Obviously, for more details, and for accurate details, see the annual report itself, and the company web site at www.desertsunmining.com. Joe Investor Tony Bortolin January 2004 eMail bortolin@pathcom.com Toronto, Canada Copyright ©2004 T. Bortolin Nothing in this article is intended as investment or professional advice or as a recommendation to buy or sell anything. Each reader is solely responsible for doing his own due diligence or obtaining his own professional advice before making any investment. All information is taken from sources believed to be correct and complete. Disclosure: Tony Bortolin does have a position in this company at the time of publication. Tony Bortolin did not receive any compensation for this report. _______________ 321gold Inc Miami USA .