May 31, 2006

Summary/Conclusions: Decision about investment in Cassidy obviously has passed almost entirely away from share price depending mostly on "latest drill results" to price governed by who has dominant share ownership and what such majority shareholders have in mind.

Cassidy (CDY) is delineating and evaluating more than a dozen promising discoveries. These are in close proximity to each other. Reports of discoveries and extensions do not move share price much. The third party resource calculations reported a year ago of results from parts of only three of the finds indicated more than enough gold to justify a mine even then. Those discoveries have since been confirmed and extended and new ones added.  Whether the next calculation (expected in June or July '06) indicates one million ounces, or more or less, really may not matter much to the share price anticipations. The shares are deeply under priced even on last year's announced resources. More good prospects are recognized to exist. The market simply does not care about these facts.  

CDY's shares enjoy good liquidity but continue to trade at a deep discount to underlying value. Highly knowledgeable, new shareholders recently took very, very large share positions. One new, huge shareholder is an investment fund that recently turned itself into an operating mining company. It purchased sufficient treasury shares and holds share purchase warrants in sufficient amount to become a 21% CDY shareholder. Under the rules of the TSX and Securities Commissions, that can cause it to be designated a "special controlling shareholder". Such shareholder's actions are subject to added regulatory scrutiny if the shareholder takes an active part in the management. This adds to assurance of fair treatment for small shareholders. What should an investor do? I have compiled some observations to help in my decisions and share them now with you. 

What does an expert say? Dr. Skousen is an economist, financial advisor, university professor, and author of more than 20 books. An ex-CIA economic analyst, he has been a columnist for Forbes magazine, The Wall Street Journal and appeared on ABC News, CNBC Power Lunch, and CNN, among others. He is a self-defined mining investment "expert" but I doubt he has heard of CDY. Here is what he says that is applicable in general. "The absolute best time to buy a mining stock is just prior to the drilling of a "discovery" to achieve spectacular returns for investors. But, statistics show that out of 600 properties where an ore body is discovered, only one is subsequently made into a mine! The experience gained over 30 years is that the truly best time to buy mining stocks is when a qualified management team is preparing to convert/construct an 'ore body' company into a producing mine".  Purchase and holding of mining stocks during the delineation, development/construction period has, historically, produced the most significant gains and carries a favorable risk/reward ratio.  Ore bodies are discovered.  Mines are made!

Key observation: Cassidy's largest (declared, known) shareholder is very much "a qualified management team" and CDY is definitely preparing to turn ore bodies into (a?) producing mine(s?).   As well, Cassidy continues to explore, in both, the traditional indicated anomalous areas of the Kourassa permits, and soon, on the Sigiuri permits, which are near a competitor's profitably operating mine! So one might get the discovery bonus Skoussen talks about in the next months, as well.  

Observations:

A. We see: Despite year to date trading of more than 16 million shares of Cassidy (about 25% of the entire currently issued and 20% of all if fully diluted) share price has gone up a paltry 40 cents from the levels at the end of 2005 to now hover around the $1.00 p.s. mark.

B. The treasury already contains sufficient funds to ensure unprecedented levels of exploration and delineation to be done for at least a year. Extant warrants priced below current share price exist. When exercised these will provide wherewithal to continue the same activity pace for about another year.

C. Who is selling? Significant puzzlement exists about the identity of the seller/buyer of the shares spoken of in A. above. Selling of large blocks comes from numerous sources.  Most of the time the "buy" broker is CDY's underwriter. Therefore some shares are likely sourced from the underwriter's clients as the fund managers lock in portfolio profits after a double in share price. They are secure in case of a runaway because they still hold warrants.

D.  But who is the buyer?  The underwriter's analyst "lowballed" the stock's potential. He sees it to only double this next year. So who is smarter than the analyst? Who has the knowledge and capacity to take up that number of shares. Is it another investment fund? Is it a potential takeover suitor? At least one major gold miner reacted to Cassidy's success by acquiring adjoining permits. Is it that same major? Or is it the largest declared shareholder? Whoever it is, it definitely appears to have the advantage of experience in interpreting announced results that the "great unwashed herd" of stock punters lack. It also has the money and patience to back a conviction.

E. Oops! Numerous junior exploration companies were able to raise spending money three and four years ago in the first blush of gold fever. Predictably (remember the one-in-600 number?) most "bent their pick". They have not had success sufficient to attract new exploration and delineation money. A few companies have done well, and a larger number have convinced the public that they are doing well, but really have less to show and less potential than does CDY. CDY is a true rara avis of undervalued junior companies even at the present low stage of gold stock fever enthusiaism. Holding one's own in these markets is testimony to value.

F.  Gold fever. Partly thanks to President George W. Bush, the following type of opinion is gaining ground among the world's investment community. "WASHINGTON (MarketWatch Update: 1:09 PM ET May 27, 2006) -- Flaws in the dollar are going to move the price of gold higher, said James Turk, the founder of Goldmoney.com, in an interview in Barron's magazine. The price of gold is "going much higher," and the $8,000 per ounce forecast he made a couple of years ago is "probably as good a target as any," Turk said. A near-term spike to $2,000 is possible," he added. Wowee! Remember what happens to CDY's (or any other miner's stock) price doesn't depend on whether such per ounce price actually comes about. What matters is how many people fear/anticipate it.  Remember the market is always 50% wrong! One of: the buyer, or the seller, shouldn't have!

DISCLOSURE STATEMENT

Ed Zederayko is a shareholder of Cassidy Gold Corp. He is not  an insider of the company.