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Extension to the Carlin Trend

Bob Moriarty
Mar 1, 2010

Like most letter writers and analysts, I probably tend to make things a little too complicated. We go on and on and on about management and projects and what we think is going to happen to the price of gold. Actually it's probably too simple for us to understand since we all act like we get paid by the word. When all else fails, you should buy stocks when they are cheap. Just because they are cheap. Everything else is smoke and mirrors.

I first wrote about Evolving Gold in October of 2008 when it seemed the world was about to end. I had visited EVG's primary project, the Rattlesnake project in Wyoming, with Evolving Gold president Quinton Hennigh. It's a great story and should be a company making project. But behind the scenes, Quinton was still planning on moving forward with the Carlin project.

The theory behind the Carlin project is that the Getchell Trend and the Carlin Trend are part of the same mineralization event. And somewhere in between is the extension to the Carlin Trend. That would be a very big deal.

When I wrote about them in October of 2008 with Wall Street in shambles and the stock hitting a new low daily, the stock was $.22. That's cheap and I said so. Anyone who listened made a lot of money.

The stock rambled higher for six months, up to a screaming $.45 when outstanding results were released from Rattlesnake in July of 2009. By then the stock was ready to move and move it did, rocketing to $1.94 at the end of July.

While it's true that 67 meters of 1/3-ounce gold is a red hot result, the more boring results such as the 158.5 meters of 2.64 g/t are what really build bulk tonnage. Evolving announced those results in February of 2010 and the market yawned.

Meanwhile back at the ranch, as they used to say in the $.10 western movies, Quinton Hennigh was drilling for the extension of the Carlin Trend. Finding it would be a really big deal. But while the Carlin is the home of 150 million ounces of gold mined and sitting in reserves and resources waiting to be mined, it is also a difficult environment to work, as it requires deep drilling. When I say deep drilling, you can interpret that as meaning both expensive and technically difficult drilling.

In September of 2009, Evolving Gold announced the first significant drill results from Carlin and the market yawned. They found 35 meters of 1.21 g/t gold. At the surface that might be an interesting number but at 858 meters down, it's technically interesting because it shows a gold system but it's not economic by any means.

Quinton used the technical data derived from that hole to spot another hole some 615 meters away. They drilled to 1200 meters and found six zones of gold mineralization including 31 g/t over 4.6 meters. The results were spectacular. I saw the press release on Thursday and put in an order on Friday morning to add some shares at $.90. The stock closed on Friday at $.92, up 19.5%. I was shocked it wasn't up 50%.

Don't let me kid you for a minute; Evolving Gold has issues, mostly with management. In a remarkable bit of timing, a director of the company, Daniel Wolfus announced on Thursday that he was suing the company because he wasn't paid $300,000 in fees for a private placement that no one had agreed to pay him in the first place and the TSX Venture rules preclude payment of finder's fees to directors.

In one of the finest bits of good judgment I've seen lately, Evolving promptly demanded Mr. Wolfus resign, there being this little problem of a conflict of interest.

Overall, I'd grade the board of directors of Evolving Gold about as dysfunctional as any I have ever seen. I have a world of respect for Dr Quinton Hennigh; he continues to bail the company out again and again. He is a lone voice of sanity in a group of goofs. If I had my way, I'd fire the whole board and start all over.

I'll crawl way out on a limb and say Thursday's announcement of drill results is a major discovery, at least as important as their drill results released last July. The market should have been up 50% on Friday and wasn't because they do such a poor job of communication and frankly, the market doesn't get it. 43-101 is a strait jacket in a way and while their results are factually correct, they are not allowed to comment on what they actually mean.

What it means is that they have a gold trend that is at least 615 meters long with maybe 20 meters deep of .4 ounces per ton. They have a lot more drilling to prove the concept but their latest announcement was earth shaking and no one noticed.

Forget buying the company for the Rattlesnake deposit that is probably worth 2-3 times what the company is selling for today. And forget buying the company because they announced world-class results last week. For certain you do not want to buy them for depth of management at the upper levels beyond Quinton Hennigh.

Buy them because they are cheap. They are as cheap in relative terms as they were when I wrote them up at $.22 14 months ago. They were a great theory back then, they have two flagship properties today either of which is worth a multiple of what they are selling for today. This isn't rocket science, it's investing. Buy stocks when they are cheap.

We own shares in Evolving Gold and I added to my position at $.90 on Friday. Evolving Gold is too cheap to pay for advertising so they are satisfied to do a piss poor job of communication. Let their stupidity be your gain. I am biased and as always you should be responsible for your own due diligence.

Evolving Gold Corporation
EVG-V $.92 (Feb 26, 2010)
EVOGF-PK 105.1 million shares
Evolving Gold website


Bob Moriarty
President: 321gold

321gold Ltd