Intrepid Minerals Corp. - written by Mike Kachanovsky

Junior minerals exploration is risky business, with the odds very much against any project advancing from grass roots stage through to profitable production.  In fact it has been estimated that only one in one thousand exploration projects ever become economic mines.  With this in mind, it is very important to focus on companies with more than one high quality development project in the pipeline, for investors seeking exposure in the sector.  Intrepid Minerals Corporation has chosen to focus activity in Argentina and El Salvador, in search of precious metals deposits.  They have advanced their Casposo Project in Argentina to the pre-feasibility stage, posting impressive high grade gold and silver showings over wide intervals in several rounds of drilling, and have recently outlined several encouraging silver and gold occurrences on their block of property holdings in El Salvador, with drilling ongoing.  The company now has a legitimate shot at taking these properties all the way to production.  This provides Intrepid with an extra dimension to achieve success, as they will have additional options on whether to vend one property off entirely, seek a joint venture arrangement with another company to fund development costs while maintaining a minority interest, or proceeding ahead with full development alone, and they will still have another property under control with attractive development prospects.  From an investment point of view, this affords investors the potential for significant capital appreciation as their development options and ongoing exploration increase the expectation that Intrepid will make the jump to the status of a producer.  I own shares of Intrepid Minerals.  I would like to thank Mr. Stephen Coates for his assistance during the preparation of this report.

Overview:

Head Office:  Toronto, Ontario, Canada

Phone Number:  416-368-4524

Website Address:  www.intrepidminerals.com

Exchange Listings:  TSX-Venture Exchange (IAU)

                                 Berlin Exchange (IP6)

Share Structure:            Shares issued:  41,494,628

                                    Options ($.20-1.72):  3,142,500

                                    Warrants ($.55-.90):  7,000,805

                                    Fully diluted:  51,637,933

Treasury:   $ 5,300,000 in cash (fully diluted $12,557,900)

Lawrence Curtis has held the title of President of Intrepid since its inception in 1996, and has taken the company to its current stage through patient and methodical exploration and analysis throughout the long bear market for precious metals that was in effect for much of Intrepid’s existence.  Choosing to focus on the relatively unexplored areas of El Salvador provided Intrepid with an opportunity to acquire large properties with excellent potential during a time when it was difficult for junior explorers to raise capital.   Bill McGuinty, VP of Exploration also has experience in the Caribbean basin during his 20-year career.  The current board of directors is well stocked with experience in junior exploration and mine development, including co-founder David Mosher, President of High River Gold Mines Ltd., a major shareholder in Intrepid.  Recently Ian McDonald was appointed to the board of directors, and as the founder of Wheaton River Minerals, he adds his experience in the development of mining operations should Intrepid choose that route as they advance exploration.

Projects:

In 2002 Intrepid acquired a 100% interest in the Casposo Property, a 35 square kilometer property in the El Indio gold belt of San Juan Province, Argentina.  This package was later extended to over 100 square kilometers with the acquisition of adjacent concessions.  A 3 km mineralized corridor has been mapped out on which several higher-grade gold-silver zones have been identified.  Much of the exploration work has been focused on the Kamilla Zone (intersections of 12m grading 61g/t gold and 853 g/t silver, and 9.2m grading 13.7g/t gold and 1517 g/t silver in hole CA-04-89) and the Mercado Zone (intersections of 6m grading 6.14g/t gold and 570 g/t silver, 8.6m assayed at .85g/t gold and 211g/t silver, and 6m grading 4.31g/t gold and 502g/t silver).  Further exploration work has identified a much larger system with several veins mapped out for several kilometers.  The current resource of 400,000 ounces gold equivalent could be expected to increase as the deposit remains open at depth and further extensions of the veins laterally remain to be drill tested.  Metallurgical studies have yielded high recoveries in the range of 90% gold and 75% silver enhancing the economic attractiveness of the deposit.  A total of $1.65 million has been budgeted for ongoing exploration at Casposo, with 8000m of drilling planned for 2004.  The shallow, high-grade ore deposit is suitable for an open-pit mining operation, and the objective is to further define and increase this resource and proceed to a feasibility study in 2005.  The weakness in the Peso has made the economics of mining in Argentina very attractive, and Intrepid is presently in negotiation to acquire further property rights in proximity to Casposo, to assemble the basis for a larger-scale gold and silver mining operation.

In El Salvador, Intrepid is starting to see a payoff from a long-term presence in the country dating back over 7 years.  El Salvador has a history of gold and silver mining activity since the Mayan culture and the Spanish conquest.  However it was largely ignored in the 20^th century, and Intrepid was able to assemble a block of properties in the largest gold bearing district in the country.  The San Cristobal property comprises 249 square kilometers, including the remains of many historic mines that have been inactive for over 200 years and have never seen modern exploration methods.  In the late-90s limited exploration work uncovered a deposit of about 200,000 ounces of gold equivalent resource but it was not until recent drilling and trenching was completed that the potential of the property has generated investor interest.  Trenching and sampling identified several high-grade veins, with wide intervals of gold and silver.  The Gigante vein was mapped out extending beyond 1.5 km.  The first drill core assay from the Gigante zone of the property yielded an eye-popping 3m intersection of 17.6 g/t gold and 1569 g/t silver as reported on March 3, 2004.  Additional drill core assays are pending.  Intrepid has also commenced a trenching program on a new discovery zone in the northwest corner of San Cristobal, the Oro Nuevo.  Trenching work so far has returned high-grade gold assays up to 3.60 g/t over exceptionally wide intervals of over 100 metres, and up to 5.24 g/t silver.  Management has taken precautions to ensure that the sampling process is representative of the true ore grade, and confirmed assay results at independent laboratory facilities.  A 5000m drilling program has been announced for 2004 commencing in June, to follow up on the encouraging earlier results, with $1.65 million budgeted, and additional geophysical surveying work and sampling scheduled.  Given that the region has produced bonanza grades of 12-15 g/t gold and 200-1000 g/t silver from historic mining activity, it is likely that a thorough exploration program will uncover additional high-grade zones at San Cristobal, and the property is fast developing into another ace up the sleeve for Intrepid Minerals.

Outlook:

As April 2004 comes to a close, the precious metals sector has been under pressure due to a variety of reasons.  Intrepid has seen the share price drop from a high of $1.43 to the current price of 90 cents, despite the encouraging results of recent exploration work, and the high probability that further high grade zones will be discovered on their projects as exploration continues.  The fundamentals for precious metals remain overly bullish and indicate a rising price for gold and silver despite the weakness and profit taking that has characterized much of 2004.  Eventually rising commodity prices will encourage investors to return to the junior exploration companies, favoring those with opportunities for major new deposit discoveries and rapid development towards production.  This period of weakness may be viewed as an exceptional opportunity to acquire shares of Intrepid at a discount, thereby increasing the potential gains as the company advances their projects.

Junior exploration companies trade relative to the strength of the commodity markets, but they are primarily leveraged to news.  The active exploration program budgeted for the remainder of 2004, and the likelihood for positive results during this program, combined with renewed interest towards junior exploration companies from investors, could all result in a perfect storm for Intrepid later in the year.  During the month of March investors were treated to an example of this as the share price more than doubled as a result of positive drilling results in Argentina and El Salvador.  The period of consolidation since then will stabilize the trading activity allowing for the potential of future episodes of explosive price appreciation later in the year.  Additional news is expected regularly from the company with extensive trenching, sampling, and drilling scheduled in the months ahead.

The risks for investors holding Intrepid are those one would expect in the sector.  There are no guarantees that the company will continue to uncover additional resources, and the economic viability of the known deposits has yet to be proven through a feasibility study.  The underlying commodity pricing is notoriously volatile and could languish for many months, putting pressure on the junior exploration sector.  Though Argentina and El Salvador are considered to be safe, stable, and pro-mining regimes with a long history of successful mining activity, the potential remains for unforeseen challenges to the claims or control of properties.  Despite the current well-funded status of the treasury, there is no guarantee that the funds will be sufficient to fund the remaining exploration required, or that additional funds will be advanced through future equity offerings.  An investment in the shares of Intrepid then should only be considered as a speculative venture by risk tolerant investors. 

Within the junior exploration sector (considered as a group for comparison purposes), Intrepid offers investors reduced overall risk through sound, experienced management, a well funded treasury, no long-term debt, controlling interests in late stage, high quality properties, and a low market capitalization.  Management has indicated the objective for the company is to define an economic deposit on each property, and then consider options for development, which would include advancing the projects to a producing mine, partnering with another company to share in the costs, or vending one project outright to raise capital to fund the development of another.  This wide range of options open to Intrepid will result in additional opportunities to create shareholder value with successful exploration activity.  Typically junior exploration companies are valued on a multiple to the contained ounces of their deposits, with the values rising as the projects are carried through the development stages towards reaching full production.  The optimum risk/reward consideration from an investor’s point of view for such companies occurs from the post discovery phase.  If Intrepid Minerals achieves their goal to uncover a large mineral deposits contained on their properties, investors could benefit through potential gains of several hundred percent from current prices.

Disclaimer:  I have made my research and opinions available to the public as a resource to provide investors and the public with basic information.  My comments and opinions should not be interpreted as a recommendation or investment advice, which I am not qualified to provide.   While I have made every effort to maintain accuracy in the information I provide, it is possible that there are some errors or omissions in my coverage and the accuracy cannot be guaranteed.  It remains the responsibility of each individual investor to confirm if the subject of my analysis is appropriate for their investment objectives, and to conduct their own research and due diligence, and retain the services of a qualified advisor on to provide this service on their behalf.  I accept no responsibility for the performance of the companies that I feature in my coverage.  Junior mining and exploration companies are a risky market sector and investment in these companies can result in loss of capital.  Past performance is no guarantee of future success.  From time to time I may purchase stocks in the companies I feature in my reports, and I may sell some or all of my holdings.  I will disclose personal ownership in those companies that I refer to at the time of my first coverage, or after follow up reports.  I do not accept compensation from companies as payment to provide positive coverage or opinions