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Irish Gold

Bob Moriarty
Sep 16, 2004

Many moons ago I came across a fascinating story about Welsh gold. British Royal tradition holds that all wedding rings are made from Welsh gold. Prince Charles and Princess Di's rings came crafted from Welsh Gold.

Who can forget
the £3,500 wedding band Michael Douglas bought for his bride, Catherine Zeta Jones, before their marriage in 2000?

It occurred to me that the Welsh had everything. Except gold of course. They don't produce much gold at all. But it's a great marketing concept. It would be a brilliant marketing plan if they actually had Welsh Gold.

So when Ken Shortt of Galantas Gold (and True North Gems to be sure) called me to talk about Irish Gold and to extend an invitation for me to visit the Galantas operation in Ireland, I did my Ross Perot imitation: I was all ears (as I packed my bags).

I'm quite familiar with True North Gems and CEO Andy Smith. I wrote about them a few weeks ago. And Andy's a great companion on a trip.

He related to me the strange but true saga of how Rio Tinto actually discovered a gold mine in Ireland. It seems that back in the early 1980s, someone from the dreaded Inland Revenue in the UK contacted Rio Tinto to determine what business Rio Tinto was engaged in. The nice people from Rio Tinto, based in London, responded that they were in the mining business. Inland Revenue wanted to know just how many mining properties Rio Tinto actually operated within the UK. It seemed the Inland Revenue wanted to reclassify Rio Tinto as a holding company rather than a mining company.

Rio Tinto responded that they didn't actually run any mines in the UK, all of their mining operations lay elsewhere. Inland Revenue was not amused. In a spirit of good will and prudent thinking, top management at Rio Tinto demanded someone in the company find a mine, any sort would do, within the UK. A group of prospectors set out and one of them literally stumbled over what eventually turned into the first fully permitted gold mine in Ireland.

Between 30,000 and 15,000 years ago, Ireland slept beneath a glacier. When the glaciers retreated, they left a 10-12 foot deep covering of muck and gravel. Most mines are discovered through surface outcrops or at least surface indications of something. With this Irish property near Omagh in County Tyrone, Ireland, nothing showed up on the surface, only traces of gold flakes in creeks running through the gold bearing veins.

Ten feet of glacial till covered everything. Including a nice size gold deposit. It was a true find, absolutely done the old fashioned way, with a pan sample of every creek and river until some tiny flakes of gold showed up in a pan taken from a slowly running stream. After much scraping of the surface muck, Rio realized they made a nice discovery.

After writing checks for about $4.5 million US on trenching, ground surveys and drilling, Rio Tinto ended up with a 447,000 ounce gold resource at an average grade of 6.9 grams with about a million ounces of silver. The resource can be mined via an open pit which means lower costs.

Someone at Rio thought about it and realized they really didn't need what is essentially a small size deposit. Rio sold the entire project to the fellow running the project who vended it into what is now named Galantas Gold Corporation. (GAL-V $.165 Canadian, about 90 million shares fully diluted, market cap of $14.85 Million Canadian GALKF-OTCBB).

If someone uses the standard business model in the gold business, a 450,000 ounce resource isn't all that big a deal. Galantas has come up with figures showing potential production of 25,000 to 35,000 ounces of gold a year based on a total capital cost of maybe $10 million US to get into production. But if you use the $4,000 per ounce of gold - by producing and selling finished jewelry -- business model of the Welsh Gold, well, you have a veritable gold mine on your hands.

For the past two years, while continuing the mine modeling, Galantas has been hard at work trying to create an Irish Gold brand name. They did a bulk sample of 150 tons in 2001/2002 and another bulk sample of 100 tons this last spring. Much to their delight, the average grade of the first bulk sample proved to be over 53 grams to the ton which is exceptional for gold which can be mined in a bulk pit.

On my visit I took a random sample and panned it. I came up with both visible gold and a high amount of sulfides. I suspect that in the end, Galantas will realize the drill results from Rio Tinto understate the grade of the gold a lot. That's just my opinion but test results from this year's sample show 44 grams to the ton. 7 grams of gold per ton at the surface is nice, 44 grams is gold pig heaven.

But the model of Irish Gold (in 18kt and 20kt) selling gold for $4000 per ounce at the retail level works at almost any level of production. The biggest problem Galantas has faced over the past two years is a lack of gold. And while 150 ounces from this year's production is nice, for the company to succeed wildly, they need many thousands of ounces of production a year.

In the past two years, Galantas have sold over $433,000 in finished jewelry.

In April of 2004, the existing management realized they needed to bring aboard professional management skills. Three owners control 75% of the stock and while they have the ability to maintain tight control, management was a weak point. In April they brought on Andrew Smith as President/CEO and Moe Lavigne as VP in charge of Exploration and Development. Finally the project can move forward, Andy is working hard at arranging financing for production as I write. I know them both and like them both. They are the right guys for the job.

I like the business model, it's Irish Gold, high carat and quality with a gold mine attached. I'd guess that in the end they can get half of retail price and it's selling for $4000 an ounce now. They have an online store where their line of 18kt Irish Gold can be bought and as production begins, they will be doing a lot more advertising and branching out into more retail outlets.

I believe Andy told me there are 50 million Irish Americans. That's a lot of wedding bands.

We own shares in Galantas. This is neither a recommendation to buy or sell their stock. We are not paid for our opinion (I'm priceless, according to Barbara!). We encourage our readers to do their own due diligence.

By the time you read this (Thursday Sep 16th) I will be winging my way to China with a stinking head cold, to visit yet another series of properties.

I am in bad books; it's Barbara's 60th birthday on 17th and (I quote) she will "spend it alone, weeping in a dark corner, eating worms, and it's no consolation to be 20 years younger than some of the gold geezers, thank you very much, matey!"

I'll be back on Wednesday September 29th, so
please don't send me email until then.

September 16, 2004
Bob Moriarty
President: 321gold Inc

321gold Inc

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