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Meritus Minerals And Its High Grade Gold In Mongolia Will Soon Be Featuring On The Radar Screens Of Bigger Producers

By Charles Wyatt

It is always worth taking a close look at any junior mining company where a successful promoter/investor has taken a significant share position, especially if this has not been noised abroad, and more especially if the shares have not attracted much attention. Thus it is with Canadian listed Meritus Minerals where Alan Eggers is a shareholder and Alan is well known for building up Summit Resources to the stage where it was Australia’s most advanced uranium exploration company with over 75 million pounds of uranium oxide under its control in eight deposits near Mount Isa in northwest Queensland. Just before Christmas 2006, when he presented for Summit at our Minesite Forum, a revised 57 million pound JORC compliant resource estimate had been released for the Valhalla deposit alone and JORC compliant resource estimates were being modelled and calculated for five other uranium deposits nearby. That was Christmas and quite a number of those at the Forum got a late present as Summit Resources was taken over early in 2007 by Paladin Resources – since renamed Paladin Energy - for around A$1.2 billion in paper.

Quite a lot of this money went into Alan’s bank account and he has since been building and promoting Manhattan Corporation which is also exploring for uranium in Australia, but he also keeps an eye out for other investment opportunities, especially if he knows the man who is the driving force behind a company. He has known Terry Bates for a number of years and judges him highly as a geologist – praise indeed! Terry, who has been around for quite a while is a fellow of the Australian Institute of Mining & Metallurgy and is chief executive of
Meritus. His strength is in geology rather than promotion and this is one reason why he is keen on having Alan as chairman of his company. This is still under consideration, according to Alan, as he has a great regard for Terry’s ability and the Meritus assets, but is not sure he has time to spare from his Manhattan duties.

He may find this decision is now easier to take as this article should ensure a steady stream of questions about Meritus which he may find difficult to answer in an unofficial capacity. Life really started for this company just a year ago when it agreed to buy the Mongolian assets of another Australian company, Troy Resources. Troy is now focussing on gold production in South America from the Andorinhas gold mine in Brazil and the Casposo gold project in Argentina. Troy closed down its Sandstone gold mine in Western Australia last September and sold its non-core assets so South America is the focus and it hopes to attract the attention of North American Investors. Included among these non-core assets were those in Mongolia as it made sense not to try to stretch itself across the world.

The actual deal cost Meritus US$500,000 to be paid in 2 tranches and 7 million shares payable in seven tranches over 30 months plus 7 million three year share purchase options. It is interesting to note that the warrants are exercisable at C50 cents in the 3rd year compared with the current Meritus price of C$21.5, but the shares were that high last October which demonstrates a high degree of volatility. Anyway Troy retains an indirect interest in the Mongolian assets through the shares as well as having a 1.5 per cent royalty from production from 10 gold targets it identified. In addition to a Mongolian company called Gutain Davaa which owns two exploration licences, Meritus also acquired various technical data, a data base on gold in Mongolia and the results of work carried out by the Centre for Exploration Targeting of the University of Western Australia. It therefore hit the ground running with its assets as Troy had already identified a number of targets.

The initial purchase was of 80 per cent of Gutain Davaa whose two gold exploration licences cover a high grade gold project in Northern Mongolia. Troy had traced alluvial back to source and identified a number of areas of gold mineralisation in basement rocks. Soil and rock chip sampling over one target area known as Toordogiin Shil gave very high gold values with 24 surface rock chip samples averaging 61 g/t gold. Subsequent drilling produced a number of high-grade drill intersections. At another target area known as Toordogiin Hayr 5 out of 9 surface samples returned gold grades as high as 334.4 g/t and 542.2 g/t, but no drilling has yet been carried out. Terry Bates was so encouraged by these early successes that he bought the outstanding interest in Gutain Davaa which was not owned by Troy to give 100 per cent ownership. Since then further high grade samples have been collected from separate locations along the Ninja vein at Toordogiin Shil.

A drilling programme started in August and the results have been good with high grade intersections obtained over a strike length of 290 metres and a vertical range of 135 metres. It is still early days and Terry is determined to keep up the exploration momentum with a winter programme about to start and the results of the last six holes of the previous programme still awaited. He is raising around C$900,000 by a private placing, but funding has been rather hand-to-mouth over the past months. The question now is how much value he can generate for the company from its Mongolian assets before taking on a partner or being acquired. This is a year when a lot of deals will be consummated for projects with potential and Meritus has the benefit of other, less advanced prospects, in a country which is now attracting plenty of attention. High gold grades always keep projects near the top of everyone’s shopping list.

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