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Olympic Dam II?

Bob Moriarty
March 3, 2004

During every mining cycle (and I don't believe this is just a mining cycle but rather a quantum shift to hard assets) some junior will ride the merry-go-round and reach for the brass ring just like every other junior. But one or more will actually catch the brass ring.

I think I found one. But they didn't really catch the brass ring, they may have caught four or five brass rings.

Let me give you some idea of what it means to catch the brass ring:

In 1975, a geologist with Western Mining Corporation in Australia was looking for an African Copper Belt type of sediment hosted syngenetic copper deposit in a remote area of Southern Australia. There were a number of known copper showings in the region similar to copper deposits found in the Central African Copper Belt mostly in Zambia and the Congo.

Western Mining carried out a number of regional studies including structural analysis, as well as both ground and airborne geophysics. In one massive area of intersecting regional structures (faults) they found massive magnetic and gravity anomalies.

Though the area showed no mineralized outcrops of any kind they believed the host rock, some 350 meters under a bed of post mineralization sedimentary cover, would contain valuable and economic mineralization. The entire project was a giant gamble because they were drilling strictly based on little more than indirect information. Drill they did and soon discovered high grade copper and gold as well as economic values for uranium. They named this new deposit Olympic Dam.

Only after sinking an exploratory shaft in the 1980s did they realize the mineralization was hosted in a hydrothermal breccia and was totally different from their African Copper belt model.

The Western Mining team found a giant deposit of 2.6 billion tons of ore grading 1.2% copper (24 pounds per ton) and .5 gram of gold per ton with the added benefit of hosting uranium in economic numbers. The gross metal value in the ground at today's prices is about $145 billion dollars:-

That makes Olympic Dam some 10 to 20 times bigger than most world class ore bodies.

A new model, called IOCG for Iron Oxide, Copper and Gold, was formed based on the original Olympic Dam discovery. Basically it involved searching for iron deposits having both a high gravity and high magnetic indications associated with copper and gold values in outcrops. If you want to mine copper and gold in big numbers, look for massive deposits of magnetite or hematite and hope that it has copper and gold associated with it.

Other major IOCG deposits include:

Salobo-Brazil .86% Cu .52g/t Au 1,200 Mt
Sossego-Brazil 1.1% Cu .28g/t Au 355 Mt
Crystalino-Brazil 1.3% Cu .3g/t Au 800 Mt
Alemao-Brazil 1.5% Cu .8g/t Au 175 Mt
Candelaria-Chile .95% Cu .22g/t Au 470 Mt
Manto Verde-Chile .75% Cu 250 Mt
Mantos Blancos-Chile .98% Cu 400 Mt

Finding a single brass ring can be quite rewarding for a junior. The last time I remember a junior making a giant find was when Diamond Fields came up trumps with Voisey Bay. That massive nickel deposit in Labrador, discovered in 1993, rocketed the stock from $.20 a share to $165, a 84,000% climb.

Often it takes many years to become an overnight success. Geologist James Dawson, who discovered this new IOCG belt in Baja, 500 KM in length, worked for many years in Chile and Peru. About five years ago he realized the Baja peninsula shares many characteristics with the IOCG belt running north-south through Peru and Chile and up as far as southern Mexico.

But first, a little history on the theory of IOCG targets:

In 1990 or so, Murray Hitzman of Chevron published a paper defining the new class of mineral deposits we now know as IOCG. He made the logical and physical connection between a variety of known deposits and districts including the Kiruna iron deposit in Sweden, Salobo in Brazil, the Great Bear magmatic zone in the NW Territories. At that time the model was still evolving and generally it was believed most of these deposits were of a similar vintage to that of Olympic Dam, 1500 million years. Hitzman realized there were similar analogs, particularly in Chile, but popular opinion held that the Chile deposits were iron only and relatively insignificant in size.

Then Candelaria was discovered in Chile and accepted as an IOCG deposit. Jim Dawson happened to be working in Chile and visited the Candelaria mine as well as a number of similar deposits and showings near Copiapo and La Serena, north of Santiago. In 1999, a friend of Dawson's mentioned to him that there were a number of iron deposits in Baja California Norte and some had copper associated with them.

Jim and his partner visited every known occurrence of iron and copper in Baja, sampled for the indicator elements and everything matched. The characteristics of the known IOCG belt extending through Peru into Chile are striking in comparison to this new discovery of Jim Dawson in Baja California. Same metals, similar host rocks, similar age, similar geological setting and similar alteration. And with any luck, similar potential for the discovery of similar large and economic mineral deposits.

Once convinced of the nature of the up-to-now unknown IOCG belt in Baja, Jim Dawson and his partner did a lot of preliminary leg work and began tying up major land positions in the belt. After trying to attract the interest of a number of junior mining companies in the project and being rejected, Jim met with success with Henk van Alphen of Cardero Resource Corp., with whom he had worked before in Argentina.

Eventually in 2002, Cardero realized they needed to bring a major mining company into the project. Financing was scarce with copper hovering in the $.60 a pound range. BHP Billiton, the world's largest base metals mining company, expressed an interest but would never actually belly up to the bar.

In September/October of 2002, Jim Dawson and Henk van Alphen cornered Anglo American and after a presentation and field visit with their top geologist, signed a deal on the spot.

The project is big, very very big. But in a deal which is still debated within Cardero, they seemed to give away the candy store. But I don't think they really did. The basic original deal called for Anglo to invest $3 million to gain a 70% interest. That's cheap, damned cheap. But one major parcel, the San Fernando copper mine, was still in the hands of a private Mexican owner.

If Cardero/Anglo had inked a $10 million dollar deal, everyone and their brother would have paid attention. And that's the last thing the partners needed at that point. The person controlling the key San Fernando piece could and would have held them up for ransom. I have known about the project for over a year and while I was anxious to write about it, I was strictly warned to keep my trap shut, lest I queer the deal on the key element to a very big deposit.

Let me give you an idea of big:

What Cardero and Anglo call the Alisitos IOCG Project consists of 200,000 hectares (500,000 acres) in a belt roughly 75km by 15km wide extending mostly north/south. Within this 200,000 hectares, some five major hydrothermal systems have been identified, having up to a 30 square kilometer alteration envelope.

The big mama is the San Fernando property. And couple of months ago Anglo finally came to an agreement with the owner of this key property. I saw both the gravity and the magnetic map of the area. There is a blob right under the San Fernando mine. This copper mine appears to have been in small scale production going back to the early 19th Century. The blob measures 4km by 2.5km and appears to be covered with 85 meters of overburden and measures 100 meters in thickness.

I love the metric system. When you want to determine the volume of a giant blob, you simply multiply the first number by the second by the third. In this case, a simple back of the envelope calculation shows a body of something 1 billion cubic meters in size. I believe the Anglo team now working on the project (It's their #1 project in the entire world) have come up with 15-20 different surface outcroppings around San Fernando with many grab samples in the 1-4% range for copper and nice gold numbers.

The material is both highly magnetic and dense. Based on another back of the envelope calculation, 1 billion cubic meters of magnetite would be about 3 billion tons. It could be valuable ore, it could be 3 billion tons of lukewarm elephant snot which just happens to be magnetic. No one knows and no one will know until they drill the deposit. Anglo has filed for a permit and drilling should occur within the next 4-6 months.

It's one of five major systems identified within the monster size and new IOCG belt. With any luck, Cardero and Anglo have a major find on their hands. For all we know now, they may have five major deposits on their hands. In any case, this project is going to make the industry stand up and bark. There will soon be a staking war in the Baja to beat the band. But Cardero and Anglo have a five-year head start thanks to the brilliance of James Dawson.

I've been writing about Cardero for a long time now. I love the management - Henk van Alphen is one of the coolest, knowledgeable and most-dedicated men in the business. And Jim Dawson is one of the best in his field. Cardero gave me a compliment by inviting me down to inspect the property before any other writers. You may safely assume I am biased, I am. I own shares in Cardero, they are an advertiser but we are not in any way paid to promote them. In my opinion, the market has given not a lick of value to the Alisitos property in market cap. So you can figure out for yourself what the odds are of finding a 3 billion ton ore deposit or a big bunch of elephant snot.

If it's elephant snot, the stock is fairly valued at $3. If it meets Anglo's 500Mt minimum, it's a home run for everyone and Cardero will be bought out or at least this project will be bought out and we can all retire rich.

Cardero Resource Corp.
(CDU-V $3.05 Canadian CUEAF $2.29 US) 31.8 million shares total.

Bob Moriarty
March 3, 2004

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