26 Kyle Avenue
Mount Pearl, NL
Canada A1N 4R5
| ||December 15, 2009|
Author: Colin McKenzie
| ||Dear Reader,|
Cornerstone has been through a very challenging 18 months starting back in April/08 with the shutdown of the mining industry in Ecuador by the Mining Mandate, then followed by the worst bear market since the Great Depression. While many junior mining companies have not yet enjoyed a strong price rebound, with more liquidity coupled with record high gold prices, we expect to see a returning interest in the junior mining sector. The improving fundamentals will mean that companies (and their shareholders) with compelling project results and new discoveries will be rewarded.
We have positioned Cornerstone to take advantage of the improving market conditions through our strategy of maintaining our assets and relationships in Ecuador, despite the extended period of regulatory limbo in the country. Ecuador represents one of the world's most significant and underdeveloped mineral districts with gold, silver and copper potential to rival its more advanced Andean neighbours, Peru and Colombia. Now with the renewed commitment by the Ecuadorian government to facilitate the development of the mining sector, we are confident that we will be able to demonstrate that our projects have significant economic value.
Two recent developments in Ecuador have paved the way for our successful re-start of exploration activities. Firstly, we signed a binding letter of intent for the Shyri property on October 29th with Intrepid Mines Ltd of Australia. The option-joint venture agreement requires Intrepid to pay Cornerstone $US 250,000 and make a private placement of $US 500,000 at a 20% premium to the market as a condition precedent of the definitive agreement. Intrepid is then committed to spend $US 1.0 million in the first year and a total of $US 6.0 million over 5 years to earn a 60% interest in the property. A unique feature of the agreement allows Intrepid to earn an additional 20% interest in a specific area of the Shyri property of up to 5000 ha defined as a Project Area. Upon designation of a Project Area, Intrepid will make a $US 750,000 private placement in Cornerstone. To earn the additional interest, Intrepid will complete a bankable feasibility study or incur expenditures of $US 20.0 million, whichever comes first, and make a cash payment to Cornerstone of up to $US 5.0 million based on the gold equivalent ounces in the mineral reserve. There is no limit to the number of Project Areas Intrepid may designate within the property and each 'stand-alone' Project Area requires the same earn-in requirements.
Intrepid has also shown its confidence in Cornerstone's exploration expertise by agreeing to appoint Cornerstone as the project manager under their technical direction during the earn-in period. Cornerstone will provide administrative and technical services using its Ecuador-based staff for which it will charge a 10% administrative fee.
The second, long awaited event was the enactment of the Mining Regulations on November 4th. This represented the last regulatory hurdle for companies awaiting the final approval to re-initiate work. Subsequently, Kinross and Corriente have received the go-ahead from the government for their major development projects at Fruta del Norte and Mirador, respectively. Cornerstone's "green light" should not be far behind.
We have not been entirely inactive, however, as early stage prospecting and reconnaissance geochemical surveys have continued on the Macará area in southern Ecuador. The work is being carried out under our strategic alliance with Newmont, the world's second largest gold producer. Preliminary results from the field have been very promising from this little-explored district.
While awaiting these important events in Ecuador we have continued to advance our projects in Atlantic Canada with the focus being on the Little Deer copper project in Newfoundland. Little Deer is situated in the historic copper-producing region of Green Bay and, indeed, copper was produced from the property in the 1970's. The past producing Whalesback copper mine is also on our property, giving us a strategic location in a developed mining area near all important infrastructure; power, transportation and a skilled work force. In July this year we received the first estimate of mineral resources at Little Deer from Micon International Ltd. Micon estimates there are 3.0 million tonnes of indicated and inferred mineral resources averaging 2.5% Cu. It is also important to note that while cobalt is a potentially valuable by-product at Little Deer its concentration was not estimated due to a lack of analytical data in the historic results incorporated by Micon in the resource estimate.
We are continuing to drill at Little Deer with our 50% partner, Thundermin Resources. The current program is designed to increase the tonnage of the deposit in support of our target resource of 5 million tonnes. Drilling will continue until year end at which time the partners will issue results of the current program. Planning for the 2010 program is also underway. Our announcement last week of a $1,000,000 flow through financing will allow us to take full advantage of further opportunities in developing Little Deer.
This fall, in an effort to broaden our investors' exposure to the emerging high tech metals sector, Cornerstone acquired the Letitia Lake property in Labrador and the New Ross property in Nova Scotia. There are a number of known beryllium (Be), niobium (Nb), tantalum (Ta) and rare earth element (REE) mineral prospects in the Letitia Lake area but little previous exploration. Cornerstone staked 146 claims based on high values of elements such as Be, Nb, Ta and REE's in a government till geochemical survey. The anomalies are considered to be un-sourced, although of local derivation as indicated by ice direction and glacial dispersal studies. Since Cornerstone's entry into the area other companies have also acquired claims within the Letitia Lake volcanic rocks. Although it's early, this could be a developing area play.
The large, 676-claim New Ross property envelops a number of historic prospects and areas of favourable altered, fluid-rich granites that have the potential to host lithium (Li), Nb and Ta and other rare metal mineralization. Past exploration on the more than a dozen known prospects focused on commodities other than the high tech metals and virtually no systematic exploration surveys have been conducted in the area since the 1970's. We plan to complete a digital compilation of historical exploration and government geoscientific data of both properties. Possible follow-up exploration programs comprise airborne magnetics and radiometrics, till and soil geochemical surveys, prospecting and geological mapping. Cornerstone is also inviting expressions of interest from potential joint venture partners to carry out exploration on the Letitia Lake and New Ross projects.
With a view to re-invigorating our investor relations program, we have retained Mr. Martti Kangas of GEO Capital, Toronto as investor relations consultant. Martti has had a dynamic career in publishing, IR and corporate communications both as a consultant and corporate executive. He has 10 years experience dedicated to the mining and petroleum sector assisting small and mid-cap companies. During the late fall, we began to establish new relationships with a number of key investment advisors, analysts and bankers. I encourage you to make Martti your first point of contact. You may reach him by telephone at (647) 521-9261 or by e-mail at email@example.com. We welcome your comments on this and on any other aspect of our work. We also encourage you to regularly visit our website at www.cornerstoneresources.com for project information and our latest news.
You can also hear a recent interview on Wall Street Reporter with Colin McKenzie by clicking the following link:
Thank you for your continued interest and support. We are working hard to create opportunities and value for our shareholders.
Colin B. McKenzie
President & CEO
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