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Property Identification Agreement Between
Dr W Pierce Carson And Azco Mining Inc
Covering 24 Or More Potential Acquisitions

 

"From his extensive experience in the mining industry prior to his association with the Company, Dr Carson has become aware of specific properties that may represent attractive acquisition opportunities for Azco Mining Inc and Azco has already acquired two of these, namely the coveted and extremely valuable Ortiz Land Grant 2 Million ounce Gold deposit and New Planet Micaceous Iron Oxide (MIO) deposit. Over the span of his 35 year mining career, including properties above, Dr Carson has discovered or identified as many as 50 properties around the World considered economically viable or with very high potential for mining success at some future time and since Azco Mining Inc wishes to acquire high quality exploration and mining properties as part of its objectives for growth, as part of his employment contract, Dr Carson agreed to make available to Azco a list of twenty-four (24) properties and all the information he possesses in regards to these properties and cooperate fully to facilitate detailed assessments and aid with the acquisitions of same.

 

Acquisition of properties is a laborious and time consuming process however in spite of this, Azco has already succeeded in acquiring two extremely valuable properties and disclosed negotiations on two others are already in progress and may be well advanced. Given that 24 properties may be attractive enough to acquire, it would not be unreasonable to assume that up to 6 acquisitions per year may be possible and thereby over the next 4 years build strategic long term reserves up quickly in anticipation of higher metals and mineral prices over time.

 

Azco's immediate objectives are to bring its properties on line and into full production as quickly as possible to satisfy the rapidly growing demand for exotic minerals and increasing demand for Gold and Silver driving today's price to 25 year highs and acquisition of new assets.

 

Azco's Strategic Mission

"Through strategic acquisitions using its experience and expertise in mining and markets, Azco Mining's aim is to enhance shareholder value and build a strong cash-flow driven resource company with significant sustainable revenues annually, within the next several years"

 

In presenting a guidance on levels of projections based on rising Gold prices:

 

Does not include 2nd Million ozs of Gold having equal or greater value than 1M

 

Could Azco earn up to $1 pr share in due time? Before you say No Read Below:

 

Consider the following most basic valuations for Azco's  1M Ounces Ortiz Gold:

 

Net value of project at $500 per oz after all costs: $180 Million or $2.25 per sh

 

Net value of project at $600 per oz after all costs: $270 Million or $3.37 per sh

 

Net value of project at $600 per oz $100M Copper $370 Million or $4.62 per sh

 

Net value of project at $500 per oz incl upgrades: $360 Million or $4.50 per sh

 

Net value of project at $600 per oz incl upgrades: $432 Million or $5.40 per sh

 

Net value of project at $600 incl upgrades and Cu $532 Million or $6.65 per sh

 

Net value of project at $650 incl upgrades and Cu $577 Million or $7.21 per sh

 

Net value of project at $700 incl upgrades and Cu $644 Million or $8.05 per sh

 

Total Project Value at $600 per oz incl upgdCu $1,064 Million or $13.30 per sh

 

Total Project Value at $650 per oz incl upgdCu $1,154 Million or $14.42 per sh

 

Total Project Value includes 2nd Million ozs of Gold + $200M Copper potential and since the 2nd Million Ozs has even higher grades in some veins, it should equal value: Doubles original 1M oz $577 Million $7.21 per sh to $14.42 per sh

 

Now factor in Azco's 24 targeted acquisitions, the next of which is indicated to be a Gold and Silver property of significance: Viz 1 Million ounces, but this one with near term production potential and could effectively increase again, all of the above numbers putting Azco's upside at current Gold prices $21.63 per sh

 

None of this includes enormous potential for upside exploration and discovery of multi-million additional ounces of Gold and Silver plus Copper Lead and Zinc

 

And these prices do not include the massive in-ground reserves that the New Planet and Black Canyon Deposits represent effectively valuing AZMN at $50 ps: Including upcoming acquisition(s) should value Azco between $3 and $4B

 

It should also be borne in mind that Azco is an advanced exploration & mining stage company with proven reserves and though inground and non-producing as yet has enormous intrinsic value & monetizable assets, as opposed to many other exploration entities with unproven reserves that receive unconscionable valuations with huge caps for what may never ever become producing mines.

 

That's why Azco is currently considered extremely undervalued and versus its peers should be trading at $5 plus at least today and potentially a lot higher...

 

AZMN - Stunning New Comparisons and Valuations

 

Recently revealed compelling new valuations for Azco's Ortiz Reserve upgrade were significantly underestimated in previous editions of this report, as it now appears to potentially value the 1 Million Oz reserve at almost double previous estimates of a net value of $180 Million to almost $400 Million today with Gold prices consolidating around $650. The impact of what Dr Carson describes so aptly below as: "An improvement in grade of this magnitude, would have a truly dramatic effect on the project's already very attractive economics", now more effectively translates to net annual revenues for 10 years at $65 Million.

 

Quoting from the recent Azco press release: In reviewing the results Dr. Carson stated, "As attractive as these economics are, we can see significant additional upside in a number of areas. Importantly, MAG's study concluded there is a strong possibility that the gold grades and contained number of ounces have been significantly understated. This conclusion is based on reports by previous companies involved in the project and by an independent review conducted by a firm that specializes in resource estimation. That firm concluded that the actual grade could be up to 30% higher. An improvement in grades of this magnitude would have a truly dramatic effect on the project's already very attractive economics". - More...

 

Now, factor in this: Goldcorp's CEO Sees $800 Gold and $25 Silver by 2007 and US Gold's McEwan $2000

 

At $1000 Azco's Gold net would increase in value to around $805 Million AZMN could earn $1 per sh

 

MORE AMAZING NEWS: A GOLDEN BUYING BINGE

 

2005 December 22 Barrick Gold Buys Placer Dome for $10.4 B at a P/E of 123. 2006 Gold Rush Takeover Bonanza - Values Azco Mining Inc AZMN at sky high levels renders AZMN as rich potential target due to extreme undervaluedness: Feb 24 2006 Glamis Gold Ltd GLG Acquires Western Silver WTZ for US$1 Billion

Feb 22 2006 Acquisition of DEZ  -  Values Desert Sun Mining at US$500 Million With pre-feasibility estimates: Total Proven and Probable reserves in all zones containing 1.51 Million ounces of Gold as per Jan 26 2006 update by definition has to value Azco Ortiz deposit with more than 2 Million contained ozs of Gold as being at least as valuable not including recent 30% improvement in grades therefore potentially valuing Azco at well in excess of $8.00 per share, similar to other valuations arrived at below by other independent means and does not take into account the significant additional upside the Ortiz Gold deposit holds thus, theoretically, DEZ valuation places AZMN at least $10, without upgrades and could potentially value AZMN at $12.6 factoring in any possible upgrades. With estimated output of 100,000 oz pa from Azco's Ortiz Deposit at current Gold prices of $660 plus: Expected net annual earnings, would equal $30.44 Million, not including 30% expected improvements in grades, could boost net earnings to near $40.00 Million. At a P/E Ratio of 123 would equal a per share price range for Azco of between $53 and $70 with an industry mean of $45 +. It's becoming increasingly evident that Azco Mining is not only very extremely undervalued it has a lot of catching up to do to reach a $21 mean from current Obviously additional acquisitions Azco is negotiating could explode estimates, not including recent revelation of Azco's hidden assets of near $50 per share. As 2006 Dawns...
Is the World really running out of Gold ? With 2005 Gold production reportedly at its lowest production levels in almost a Century: The evidence is highly compelling: The deep and once very gold-rich South African Mines are mined out - Some say Australia is also tapped out - US remains prospective as a growing annual demand to supply deficit estimated at 1,220 tons cannot be sustained indefinitely by banks. According to the US Geological Survey USGS, they anticipate only 50,000 tons of Gold available for future recovery, another alarming statistic that could soon inspire panic buying as we're consuming Gold at a rate of 3,760 tpa, with just 13 years left! Gold values have been rising for 5 years in a row and since September 2005 have been soaring, reflecting a variety of fears that include the possibility that within 2 or 3 decades, the World could run out of mineable Gold. The most precious of all metals that for thousands of years has been the ultimate store of wealth and legend of Gold rushes and mining bonanzas in times past as new discoveries continued have continued to be made, may finally be reaching finite limits of production and sustainable output. In recent years sharply awakening revelations that demand for Gold may already be outstripping supply by as much as 1,500 tons per annum is a stunning dimensional statistic that in of itself, is a truly alarming wake-up call as to the future availability of Gold in a World where speculation, hoarding and profiteering, now only just beginning, could run rampant... The almost unbelievable possibility that the World could really run out of mineable resources even within 20 or so years, places a huge premium on any proven resource of One Million ounces or more, let alone 2 ~ 5 Million ounces plus and so, with the latest report last month that Azco Mining Inc's Ortiz Gold Deposit contains 1 Million ounces ready to mine... Valuing Azco's Outstanding Feasibility -
Ortiz Gold Project Quick Valuation by savvy accountant who was sought after by one of the richest families in the US to account their fortune:

1. It looks to me based on a quick valuation calculation that the gold component of Azco Mining Inc is worth $6.37 per share as follows:
2. Pre-Tax profit after capital costs, operating costs, refining, royalties and depreciation is estimated to be around $37 Million per year.
3. After-tax profit (assuming a 40% corporate rate and no net operating loss) estimated at $20.8 Million  yr + $25 Million for tax losses.

As 2006 unfolds: How many stocks can you genuinely identify as being 10 times undervalued based on comparable proven in-ground values of major mining companies. Just as Google rose against all odds because it keeps on getting more valuable, so too Azco Mining AZMN keeps adding value per recent press releases: Additional acquisitions may be pending, so more value could yet be added... In fact substantially more than a few acquisitions may be pending, as the company just recently revealed it has targeted at least twenty four (24) prospective properties, including the already acquired Ortiz Land Grant that combined, may hold truly staggering potential riches.

Of late there's been a lot of speculation about the potential of Nevada's Cortez trend as a potential major producer with US Gold boasting of making a major land grab, adding to its Tonkin Springs property with inferred Gold reserves of 1.4 Million ounces, seeking to acquire four additional public companies that surround US Gold's claim that comprises a significant area of the Cortez trend calling it a major holding. The difference between US Gold's inferred claim and Azco Mining's proven reserves might arguably be the fact that Azco Mining has inherited one of the most valuable remaining undeveloped mining leases in continental US. The famed Ortiz Land Grant comprises 57,267 acres covering 90 square miles, in what easily could be described as the landmass of a major that by some measures could be twice the size of the Cortez trend and just a small part of which, the Carache and Lucas Canyon deposits hold 2 Million ounces proven reserves of Gold and the remaining areas are said to offer "Superb Upside Exploration Potential." Former executives of Newmont Mining Inc, retained to conduct a full scale comprehensive engineering, feasibility study and evaluation report on the property, are said to have described Azco's Ortiz Gold Fields as sensational at $400 oz and at recent prices of $520 oz, almost beyond spectacular... At $600 lost for words...

What does this mean? It could mean the Ortiz region might become one of the more promising prolific Gold producing regions of the 21st Century. Just 40 years ago when copious amounts of Gold were first discovered in Nevada: It was thought that while it might produce Gold on an economic scale, few could have foreseen how technology would enable the State of Nevada to become one of the most prolific Gold producing regions of the World,  catapulting the United States into 2nd place as a World producer of Gold, behind South Africa and overtaking Australia. Could the Cortez trend could hold such promise too? Yes but the Ortiz trend could also be an extension from Nevada:

30 yeas ago, the Grasberg Gold-Copper deposit was first discovered in Indonesia. The initial reserves were thought to contain One Million Ozs of Gold and Seven Billion Pounds of Copper. Thirty years later, Grasberg is now a true Global Superstructure Giant producing three Million ounces of Gold and Billions of pounds of Copper annually and like finding a veritable Iceberg of reserves beneath the initial surface discovery at its near ground peak, entire deposit base reserves have grown to 35 Million ounces of Gold and 150 Billion pounds of Copper. The lesson of Grasberg is prospectors who discovered this early insignificant find were later shocked to have found the mother of all lodes.

In the same way as Nevada's Carlin and Getchell trends... Could the Ortiz Gold Fields contain a similar 'Iceberg' of underground Gold and Silver? Could the Ortiz area become a Western Hemisphere Infrastructure Giant capable of high Gold productions? Since the property has already been reported as potentially rich for underground mining, such probability cannot be ruled out and when some of the World's most highly qualified and respected Geologists have declared the entire 90 square mile deposit to offer "Superb Upside Exploration Potential", in view of what happened both in Nevada, where some of the same geology exists in the Ortiz range and with The Grasberg Project, it might be extremely foolhardy to summarily dismiss the high probability of the existence of, at least several million additional ounces of Gold...

And, since Azco Mining management has already reported that they are in negotiations to acquire additional drilled reserves of Gold, it might be equally foolhardy to pass on the opportunity to invest in what may become one of the most aggressive junior exploration and progressive mining companies of our time, that, with an estimated $3.2 Billion in gross in-ground proven reserves already part of its growing portfolio, this may be one company to own as possibly the cheapest way to buy into the current Gold boom that could have major upside.

'The power of the Base': It's been our good fortune to have recommended numerous issues when and where few others have dared to tread. Perhaps our most successful call and as possibly the only analyst to publicly highlight and recommend Headwaters Inc NYSE: HW, (formerly NASDAQ: HDWR) from the lows of  50 to 70 cents range in December 1999, to its recent peak at $45 in July 2005 and now what has become the 2nd fastest growing company in the US, having risen 95 fold or 9,500% off its lows, is a rare and stunning call in any Wall Street history. In other words, $10,000 invested in HW in December 1999, would have grown to almost $1 Million in  5.7 years. At the time we recommended HDWR - HW, our visibility was nothing like that of Azco Mining's is today. That's why we see so much upside:

In the case of Headwaters, apart from the in-ground asset values of $1 Billion or so, it was hard to foresee how tremendously successful HW would eventually become. In considerable contrast, Azco's acquisition program adding to its already immense $3.2 Billion gross in-dependently verified in-ground valuations, with hidden assets of almost $40 per share, AZMN offers unusual visibility for a bright future.

The shareprice structure and subsequent rebound in Azco looks like a larger version of what happened with HW portends major upside.

Latest valuation update versus most comparable peers with no proven reserves, but comparing inground estimated reserve ownership.

Based on where US Gold USGL is trading AZMN should be trading at $9.05 per share, again with considerable additional premium for its Azco's proven in-ground reserves and considerable upside potential of the 90 square mile highly prospective Ortiz Land Grant Reserve and:

Perhaps a better way of illustrating AZMN's extreme undervaluedness, is to compare it with Gold Giant Newmont Mining Inc NEM which, according to one well known analyst, when buying NEM recently, you were in actuality buying an ounce of Gold in-ground for about $448, excluding the depreciation and amortization costs etc. At today's valuation for AZMN, with everything else for FREE: (Arguably worth an estimated $10 per share). For the Gold component, you are paying $44 for each ounce in the ground: Which stock would you rather own?

That values AZMN's Gold component share price at $14.00 per share today, without factoring in Azco's 15 ~ 30% lower production costs.

Versus the recent soaring performance of Paramount Gold PGDP on a partial interest in a 30 Million Ounce Silver 'prospect': Given the Mission Statement below wherein Azco's management has declared its intent to acquire only high quality proven reserves, one can truly only imagine the impact any additional acquisitions (that according to press reports are under negotiation), are likely to have on AZMN...

Just taking into account the 1.03 Million ounce open pit Carache and Lucas Canyon deposits and utilizing a very conservative estimated market capitalization using a P/E of 23, (the Yahoo average for gold stocks) is estimated to be 254.88 mil, but that does not take into account the potential 30% improvement in grades that would raise the value to $532 Million plus not including significant tax losses, would raise the share price value to $6.65 and still does not take into account the valuation of Ortiz's additional 1 Million ounces of proven Gold that potentially would carry a similar up to $6.65 valuation, with the possibility that it too could be the subject of quite signficantly higher grades of perhaps even greater than 30%, given there are already significant previous indications of much higher vein grades underground.

Tomorrow Part 4 - Ortiz Land Grant - History and Folklore

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