J Taylor’s WWW.MININGSTOCKS.COM Gold Energy & Tech Stocks (Now in our 30th Year) Weekly Hotline Message February 25, 2011 New Buy Recommendation Northern Gold Mining Inc. Business: Exploration and development of gold mining deposits in Ontario Traded TSX: NGM US OTC: NTGMF Price 2/25/11: US$0.496 Shares Outstanding: 88.6 Million Market Capitalization: $44 million Fully Diluted: 132.7 Million 43-101 Gold Resource: 983,740 Oz. Progress Rating: A-3 Telephone: 416-366-7300 Web Site: www.northerngold.ca Northern Gold Mining Inc. is in the process of earning an 80% interest in two gold exploration properties in Ontario that appear to have the potential to become world-class deposits on a very large block of claims known as the Garrison Claims. The flagship property on the Garrison Claim Area is the Garrcon Property. The second property, located adjacent to the Garrcon, is the Jonpol Property. Both of these properties are located along the prolific Destor-Porcupine Fault System. Both are very promising properties. However, the Garrcon Property is an open-pit bulk-mineable target that would definitely appear to have multimillion-oz. potential. It has been chosen as the flagship property for this company because of the relative ease of building ounces rather quickly. The Jonpol Property, on the other hand, is a high-grade underground target that also appears to have great potential for becoming a prolific gold producing mine. However, as with most underground mines, capital costs and mining costs would most likely be higher than for open pit mining and much more expensive to prove up a deposit sufficiently large to justify capital costs to build a mine. The Garrcon Property So far, the Garrcon Property has a 43-101 resource of 674,000 ounces of gold contained in 22.3 million tonnes. The indicated and inferred tonnage has an average grade of 0.94 grams/tonne. What causes me to be so excited about this property is that fact that these ounces are contained within an area that measures 760 meters by 300 meters and to a depth of only 200 meters. Historical holes have been drilled to 500 meters, where the hole was still in mineralization at the bottom. In other words, the thinking is that these ounces could be doubled or more at depth, which reminds me to tell you a little about the geometry of this deposit. The gold-bearing structure is not only at surface, but it is also raised above the surrounding topography so that there TAYLOR HARD MONEY ADVISORS, INC. PO Box 780555, Maspeth, NY 11378 (718) 457-1426 Feb. 25, 2011 2 will be zero waste to ore mined in the early years of mining the deposit. That should result in a low overall stripping ratio for a mine, even if mined to a depth of 500 meters, as the depth of the open pit would be relatively shallow, compared to the surrounding topography if/when mining occurs. And because these mineralized zones in these gigantic fracture zones tend to be mineralized at great depth, there is the expectation that gold mineralization is likely to exist at 500 meters and below. But depth potential for an open-pit operation is really a minor part of the story. The potential to extend this deposit out laterally is enormous. To help you grasp that potential, check out the illustration above, which displays historical and recent drill holes on the company’s claims. Notice the Garrcon Deposit outlined in red in the center and toward the bottom of the illustration. The red outline is the area from which drilling has been concentrated to date. But it is only the area within the green-outlined area from which the current 43-101 resource of 674,000 ounces was calculated. The other areas require infill drilling to qualify for 43-101 resource status. We can say with some confidence that the areas outside of the green boundary and within the red boundaries are likely to add significantly to the total ounces within the red area, because mineralization continues to the eastern boundary of the red-outlined area and at the southwestern boundary. Of course we will have to wait for further drill results and 43-101 calculations, but my belief is that within this area and to a depth of 500 meters we could be looking at between 3 and 4 million ounces. But wait! That’s still not the entire story! Take a look again at the map above. Note the larger black area, which is the current boundary of the company’s claims. Note that there are mineralized drill holes lying outside of the current boundary both northeast and southwest of the current boundary. These rocks are believed to be the same package that hosts the Garrcon Deposit and not part of the Jonpol Deposit as previously believed. It is my understanding that management has secured the land extending at least to the northwestern drill holes shown on the illustration above. It is also my understanding that management is in the process of securing land beyond the southwestern corner of the property as well. Fewer drill holes have been put down to the west of the outline, but holes put down at the southwestern border were mineralized. In other words, the exploration potential here is for several more thousand meters extending out to the east and to the west of the existing calculation zone. What this tells me is that the blue sky here suggests the potential for an Osisko-sized open-pit deposit. For those of you who may not follow Osisko, it has an 11.67-million-ounce resource and is projected to produce an average of 463,000 ounces per year at a cash cost of $382 per ounce. Osisko’s market cap is around $5 billion, compared to a market cap of less than $50 million for Northern Gold Mining. TAYLOR HARD MONEY ADVISORS, INC. PO Box 780555, Maspeth, NY 11378 (718) 457-1426 Copyright @ 2011 TAYLOR HARD MONEY ADVISORS, INC. ALL RIGHTS RESERVED Feb. 25, 2011 3 Potential Economics Look Very Strong for the Garrcon Deposit Within a few weeks, a preliminary economic assessment report (PEA) is expected to be made public. That will most likely bolster the market’s confidence in this stock. And assuming the absence of any general stock market meltdown (not something I automatically assume), we should see these shares rise with that report—which, by the way, may also bring with it a larger resource. In the meantime, there are several aspects we know of with respect to the Garrcon Deposit that appear to make this potentially a very profitable gold deposit. As we noted before, at least in the early years of mining, the stripping ratio should be zero and quite low overall. An early year stripping ratio of zero for the Garrcon compares to a 3:1 ratio for Osisko and 6:1 at Detour Lake. Metallurgy is always an important issue when it comes to mining economics. Complicated metallurgy most often will require more capital equipment to process the ore, and many times operating costs are adversely impacted by higher energy costs. Of course with this mine previously in production, past reports do provide some metallurgical information. It is my understanding that the ore on this property is largely free milling with the likelihood of getting better than 90% recoveries, using simply gravity-flotation methods of separation. Infrastructure is always a major consideration. Located in the prolific gold belt of Quebec and Ontario, and with Highway 101 running right through the property, access is very easy and a power line is also there along the highway, which could help reduce costs significantly over reliance on generated electricity. Water and labor are also abundant and spare parts are quickly available, given the prominent mining activity that takes place from Val d’Or, Quebec, up through Timmins in Ontario. The Jonpol Deposit While the Jonpol Deposit may take a back seat to Garrcon Deposit now, it is a very attractive underground gold deposit. The chart above shows more drilling on the Jonpol, which makes sense, because when the price of gold was low, you had to look for higher grades. The Jonpol has an indicated resource of 63,200 ounces grading 7.77 grams/tonne gold and an inferred resource of 246,540 ounces grading 4.93 grams gold/tonne. A 4.07-gram cutoff was used in this calculation. It is my understanding that the current resource number can be increased without putting more drill holes down, simply by using additional data from prior drill holes that have not been factored in to current calculations. In 1997, a 50,400-ton bulk sample was mined. From that, 13,564 ounces of gold were produced, which equates to an average recovery grade of 8.37 grams/tonne. MANAGEMENT Martin R. Shefsky, President and Chief Executive Officer B.A. Political Science and Psychology, Pepperdine University, Malibu, California Over twenty years’ management experience with existing and startup companies in Canada and the United States Founder and director 1997 to 2005 of Regis Resources Inc., Buckhorn, Ontario Background in development, sales, and marketing Experience in wide spectrum of commercial ventures, including exploration of natural resources, financial consulting, stock trading, and portfolio management Eric E. V. Szustak, B.A., C.A., Chief Financial Officer B.A. Honors Chartered Accountant Studies and Economics, University of Waterloo Chartered Accountancy Designation 1985 Principle in private accountancy practice 1987 to 1993 Private investment advisor 1993 to 2000 Investment advisor BMO Nesbitt Burns Inc. 2000 to 2007 Chief Financial Officer Castle Resources 2007 to present Chief Financial Officer James Bay Resources 2008 to present TAYLOR HARD MONEY ADVISORS, INC. PO Box 780555, Maspeth, NY 11378 (718) 457-1426 Copyright @ 2011 TAYLOR HARD MONEY ADVISORS, INC. ALL RIGHTS RESERVED Feb. 25, 2011 4 Michael P. Gross, M.S., P. Geology, Vice President of Exploration More than 40 years of professional experience in all facets of mineral exploration and mine development Experienced at both surface and underground gold mining and has toured Northern Gold’s Jonpol underground mine when operated by Hillsborough Resources Limited Designed and implemented exploration programs resulting in discovery and recovery of resources facilitating the growth of mining companies like Hecla, Exall, and Royal Oak Mines Holds a masters’ degree in economic geology and several awards for excellence in mining Jennifer Ta, C.A., Controller C.A. with Specialized Honours in Accounting, York University, Toronto Over eight years of experience with public accounting firms Former audit team leader, planned and executed assurance agreements for mining and other public companies Former Senior Accountant/Auditor at Collins Barrow Toronto LLP Over two years’ experience in controllership position in the mining industry Controller of Morumbi (TSX-V:MOU), Castle Resources (TSX-V:CRI), Jamesbay Resources (TSX-V:JBR) SUMMARY & CONCLUSION I believe the upside potential for this company’s shares from their current price level is very significant, given (a) the company’s current share price; (b) the company’s current resource; and (c) most importantly, the high likelihood of outlining a very major open-pit gold resource in an area where political risks are minimal and where infrastructure is as good as it gets. Of course my optimism is premised on the view that this gold bull market has at least several more years to go and that gold mining economics will remain strong. If I am wrong about either of those views, there would be less room for optimism longer term. It all boils down to gold mining economics for the big producers. They will be looking for new junior gold mining firms that prove up the next 5 million plus deposits. In the many years I have been following junior gold exploration stocks, it’s hard to think of many that have a better shot than Northern Gold does at this point in time at coming up big and generating huge investment gains. J Taylor’s Gold, Energy & Tech Stocks (JTGETS), is published monthly as a copyright publication of Taylor Hard Money Advisors, Inc. (THMA), Tel.: (718) 457-1426. Website: www.miningstocks.com. THMA provides investment ideas solely on a paid subscription basis. 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