meeting with john lawton md

Meeting with MD John Lawton

From the recent announcement and my meeting with Mr Lawton today we can see some very positive announcements and news flow ahead.

After having weathered the storm of the recent sell down in AUS equities AZX presents some significant value down at 48c. My price target for 2011 is $1.00

The short and medium term catalysts for AZX this will explained below but we remain very

- Snowdens report was very conservative, Snowdens evaluation are considered world class. They take a very conservative approach and this is deemed very good from a management point of view. The reason for this is that these estimates can be used to take this to bankable feasibility and if the project is economically viable at these conservative estimates, when it comes time to production figures could be higher. Meaning there is a lot more upside in resource. This is what John discussed this morning.

There is definitely more upside to the resource model. With the continued drilling that is going to occur over the next few months we should see a greater resource be proven up. The main point of the meeting was to discuss the upgrade in resource. Although a lot of the upgrade can be attributed to lowering the grade, the initial comments on the maiden reserve is what is the most interesting. We will see the next upgrade in resource in November. My opinion is that they should have waited till the merger of the 2 companies happen before releasing to increase the share price a lot more, because a lot of people are on the side lines until the merger.

Most companies when moving from resource to reserve see a 50% move and as I noted last month, this was not the case with AZX. We are looking much higher to a 70-85% conversion. This is what AZX such an undervalued company at the moment.

If the maiden reserve is around 1.5 to 2m/oz this becomes a very large deposit. John seemed very confident with the figures that are out that this is going to be a minimum with the chance of it being higher. Now when your talking this large of a reserve you start to look at some very large companies. Another stock I follow is BDR Beadell interesting to note there maiden reserve is around 1.5m oz, but note this is a higher gold grade. Now this company has a mrk cap of $500mil. AZX has a $45mill market cap.

What we will see happen as this ownership issues gets sorted out (ill get to this shortly) this will either be taken out by a 3rd party to bid for the whole company as this is a very cheap company if its gets a maiden reserve of more than 1.5m which John sees as very achievable. A likely candidate will be Baker Steel, or other medium sized firm as excelsior pointed out. Adding 150,000 oz pa to production is very profitable and considering AZX is a $45mil company, some mid sized gold producers could by AZX in cash.

The ownership issue that is holding a lot of people back, there are a lot of people waiting on the side lines for this to be sorted. John was asked this question this morning and he said there will be the 2 firms comin together we are hoping under the AZX banner. The AZX exploration assets will be spun off into a new entity. Now interesting to note the exploration assets in AZX were independently valued at 17 cents. If we use a hypothetical and use GGB last traded at 35 cents which is solely Bullabuling. Adding 35+17 = 52cents is where azx should be trading roughly. There will be a scheme of arrangement.

This is going to be announced to the market in the next 3-5 weeks. In here will be the release of the scheme etc and how the spin off will be. So people holding GGB it may be time to start moving into AZX, as you will see there will be greater value in it for you. With the spin off of azx exploration assets you will receive shares in the new entity as they are demerged from azx. Some exploration assets are very interesting especially the world class tin asset AZX have.

Soon as firms see the asset AZX have this will move very strongly up, but first is the ownership issue to be sorted. Don?t be surprised if this company once under the ownership issue is sorted get taken out by a big firm. John knows there is a lot of upside to AZX and knows this could easily be a 200mil company in no time. Id be looking at a price target of close to $1 by the end of the year. All this company needs is to be picked up by a large firm to begin coverage and AZX will fly. Interesting to note BBY will begin covering this soon, they have a strong institutional background and have completed work for IGR integra in recent months.

In terms of funding when the 2 companies join together there will be a 50:50 split and the recent capital raising by GGG is what will be used to fund continuous exploration though 2011.

If I have missed something I will post again or if anyone has any question let me know.

But the key notes are, ownership issue sorted in 3-5 weeks, continual drilling updates thought-out the course of nexct few months and expanding the drilling area., next resource upgrade nov and maiden reserve nov.