By Steven Ralston, CFA

Boa Fé gold project – Having already accomplished its goal of completing an updated NI 43-101-compliant mineral resource estimate for Boa Fé and Monfurado during the first quarter of 2013, management continues to fast track the property towards production. The company is expected to deliver a Preliminary Economic Analysis (PEA) for the Boa Fé gold project in the second quarter. Thereafter, detailed engineering work and metallurgical test-work will be completed in preparation of a full feasibility study due out in the fourth quarter.

Management is investigating the construction of a micro-plant off-site to identify the optimal processing method for the Chaminé deposit. The updated NI 43-101 technical report discusses two broad processing strategies, one of which encompasses on-site recovery utilizing gravity and flotation technologies with the concentrate being sold directly or further processed with cyanide off-site. Two Portuguese companies, which are licensed to use cyanide, have been asked to present proposals for cyanidation treatment at their facilities. The other processing strategy involves the use of cyanide on-site, which would require permitting for the transport, usage and disposal of cyanide.

Also during 2013, exploration will continue in order to increase the confidence in, and potentially expand the resources at Boa Fé. Management plans to continue drilling with both infill drilling and deep drilling. In December 2012, Colt Resources (GTP.V) announced the discovery of gold mineralization below the near-surface gold deposit at Chaminé. The assay results from two deep drill holes indicated that stacked layers of kinks and folds contain additional gold deposits. The next phase will utilize downhole geophysical techniques to better target further deep exploratory drilling. In addition, geophysical test work will aid in identifying step-out targets adjacent to the known gold deposits. Management anticipates the completion of an updated NI 43-101-compliant mineral resource estimate for Boa Fé and Monfurado during the fourth quarter of 2013.

Given the scope and timetable of the company’s work towards advancing the project, Colt Resources should have completed sufficient work for the Portuguese mining and environmental authorities to grant a definitive mining license for the Boa Fé gold project by the end of 2013. Management intends to continue to rapidly advance the Boa Fé project and achieve gold production in 2015. After having closely followed Colt Resources for over one year, it has become apparent that the company is one of the few micro caps in the mining industry to deliver consistently on management's prospective timetable.

Tabuaço – Management is also fast tracking the development of the Tabuaço tungsten project. Having been granted a Trial Mining License (aka Experimental Mining License) in February, the PEA on Tabuaço tungsten project is expected to be completed during the second quarter. Thereafter, management plans to conduct a pilot mill test on approximately 20 metric tons of scheelite ore from the São Pedro das Águias deposit. A feasibility study and an updated NI 43-101-compliant resource estimate are targeted for completion during the fourth quarter. Management expects to receive full mine permitting in 2015, complete mine construction in 2016 and achieve initial production in 2017.

In March, Colt Resources entered into a binding letter of intent to purchase roughly 247 acres (equivalent to 1.0 km² aka 100 hectares), on which the company plans to construct the necessary surface mining infrastructure for the Tabuaço tungsten project. The parcel of property, known as Passa Frio, would serve as the site for the processing plant (including jaw crushers, mill and concentrator), warehouses, dams and tailings impoundment facility needed to bring the mine into production. The property is situated away from residential areas and already zoned to permit the construction of the off-site processing infrastructure. The site was surveyed to verify legal title and tested through an initial geotechnical drilling campaign which targeted the sites of the major infrastructure facilities, namely the tailings, water dam and pit locations. At a cost of €100,000, the three-year option grants Colt Resources the right to purchase Passa Frio for €350,000.

Colt Resources has completed a metallurgical work program comprised of testing the recovery of an acceptable grade of concentrate through gravity and/or flotation recovery techniques. Utilizing mineralized ore from split drill cores from the São Pedro das Águias deposit, the program is now focused on flotation concentration only, since gravity recovery seems to be only somewhat effective. Colt Resources is also examining an option of further processing the flotation concentrates into either ammonium paratungstate or tungsten oxide.

The company is engaged in discussions with several undisclosed potential strategic partners to bring the mine to production. Management’s goal is to complete a transaction within the next 12 months. We would expect that the development of Tabuaço would be structured in a manner similar to the Santo António joint venture with the partner providing capital and further developing the project in order to earn a substantial stake in the concession. In this manner, Colt Resources would be able to focus its capital resources on the development of the Boa Fé gold project in southern Portugal.

Santo António – Management expects its partner, Consultoria Tecnica Ltda (Contécnica), to begin exploratory work on the Santo António project by mid-year. Contécnica is obligated to further develop this gold project by investing at least €2.0 million over three years in order to earn a 51% stake in the concession. By retaining a 49% stake, Colt Resources maintains upside exposure while reducing financial risk. Incremental information concerning the Santo António gold deposits could be forthcoming during the second half of 2013.

Borba – In February, Colt Resources announced the signing of a Memorandum of Understanding (MOU) with Star Mining Limited which outlines the key terms for a formal definitive agreement. According to the MOU’s anticipated course of action, Colt Resources and Star Mining plan on jointly exploring the Borba concession. After a definitive agreement is signed, Star Mining can earn a 25% interest in Borba upon expending at least $350,000 in the completion of a work program over a period of 12 months. Thereafter, Star Mining can earn an incremental 35% interest by completing another work program with expenditures of at least $750,000 over an additional 24 months. Another 20% interest can be attained by expending $1,000,000 towards technical, commercial and environmental programs required for completing a NI 43-101-compliant resource estimate. Then Star Mining will have the right to purchase full ownership of the Borba exploration license for $5.0 million within 18 months or $10.0 million during the subsequent 42 months. Management of Colt resources expects Star Mining to begin exploratory work on the Borba exploration concession towards mid-year.

We reaffirm our Outperform rating. Our price target is $2.10, which is based on an estimated share value of attributable resources indicated by Colt’s NI 43-101-compliant mineral resource estimates and utilizes the current prices of gold and tungsten. We consider our valuation model to be conservative in that it also includes prospective developmental costs at Boa Fé and Tabuaço.

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