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Phoenix Rising

September 16, 2010


Trends in the mining industry come and go, great management teams keep companies relevant and stable when their targeted resources are no longer the toast of the town.  Mawson Resources Ltd. (MAW – Toronto, MWSNF - OTC) is one of those companies, with their new gold properties really piquing investors’, and Areva’s (currently a 10%+ owner of the shares), interest in the shares.  The stock is up nearly 130% (from when we wrote about it last December) with volume surging, clearly indicating investors’ appetite for shares in the company.

We had a chance to discuss Mawson with its CEO Michael Hudson recently, and we walked away from the conversation even more bullish on our outlook for the company.  Mawson is going to be focusing much of their exploration budget on their two highly prospective gold plays, Rompas (gold and uranium) in Finland and Alto Quemado (gold and copper) in Peru.  They will also spend about 15% of their exploration budget on their uranium properties in Sweden.  The company is investing exploration dollars in red hot gold and uranium, which seems to be beginning a new bull market itself.

Mr. Hudson indicated that at the Rompass project in Finland that there is currently a work program underway that is “focused on the 6 km Au-Mineralized discovery trend to outline the extent and controls on mineralization and define the highest priority drill targets.”  In late August the company will commence a 3,200 line km airborne geophysical survey.  Right now, the company is collecting thousands of rock chip and soil samples to complete the mapping and final prospecting for the project.  This will allow Mawson to discover any additional mineralization located throughout the extensive 95.000 hectare land holding.  Although 100% secured, Mawson cannot trench or drill the project because the permits are still in the application stage, but Mawson is currently, “working with the Finnish government to clarify the timing of granting.”  It is important to note that all other exploration activities are available to the company, just not trenching and drilling until they are granted the permits (this is typical of new projects/discoveries).

At Alto Quemado in Peru, the company has a 12-member team on the ground, “mapping and sampling the high grade structures and porphyry target zone at surface and underground for the first time,” with this program defining drill targets which the company will seek permission to drill in 2011, according to Mr. Hudson.

The company believes that both Rompass and Alto Quemado have the potential to be a company maker, and this is based on the exploration work to date.  Mr. Hudson indicated that Mawson would spend about C$3.5 million on exploration with the focus being on the two gold properties.  That would leave the company with C$5.5 million in its Treasury before taking out overhead and other administrative expenses, so the company is currently well funded.  Also the company has about C$600,000 in shares of, “Canadian and Australian listed exploration companies as a result of property transactions.”

In the next 12-24 months investors should expect the company to have drilled both of their gold properties as well as continuing exploration efforts in the Hotagen district in Sweden (uranium).  Mr. Hudson also stated, “we aim to increase our exposure through Peru given Peru’s “elephant” country status to host world class ore bodies.”  If the past is any indication, any property addition for Mawson would be great news for investors as they target company-makers, rather than the cow pastures sought by many companies for the sake of issuing a press release.

Mr. Hudson confirmed our belief that news flow will be picking up as the company will be giving investors updates regarding exploration efforts.  With gold prices near all-time highs and uranium prices rebounding strongly, the releases will be drawing investors’ attention in to Mawson shares as the company has strategically acquired prime properties highly prospective for or currently containing resources of these metals.

Regarding uranium, Mr. Hudson still believes long-term it is poised to move higher, citing two key factors.  First, “there remains a long-term contango in the uranium market,” with some predicting that at some point the short and long-term prices will converge.  Also with demand rising above the supply of uranium, any new supply would have to be enticed to come to market, and with most new projects’ mining costs at US$60/lb., prices would need to rise considerably to encourage development of the new mines.

For those unfamiliar with Mawson’s uranium holdings, they have, inter alia, the Swedish Tasjo project which is a massive land package that the Swedish government believes holds 104 million lbs of uranium.  This project also has a potential rare earth element kicker as the project contains an estimated 165,000 to 180,000 tonnes of various REEs (the largest percentage from the drill results we could track down being Cerium, Yttrium, Neodymium and Lanthanum).

The company also has the Hotagen project which it will drill on this season, and the Duobblon project (Sweden’s largest hard rock uranium resource) where drilling commenced earlier this year.

It has been our belief for some time that Mawson has tremendous upside, and our conversation with Michael Hudson only served to reinforce this belief.  The company aims to use its current cash and planned exploration work to create a mid-tier junior, which with one drill season is absolutely possible.  Mawson, with its low share count, leverage to gold and uranium, strong balance sheet and extremely competent management team, coupled with some favorable future exploration results has the potential to further richly reward investors over the next 6 to 12 months.

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