The Graystone Company, Inc. (GYST)

[SMResources]

Between Gorilla and Graystone II, the Company has a total portfolio of 1,200 hectares (or 2,965.27 acres) or approximately 12,000,000 square meters (or 4.63 square miles) of mining claims in Peru. The Company estimates that the two claims could have in excess of 500,000 ounces of gold (or $825,000,000 at current gold prices). The Company is expecting that only about 15% of the claims may be viable to mine. Based on 15% of the claims being viable, the Company estimates the revenue potential could be up to $125,000,000.



Round numbers

12,000,000 square meter x 1 gram gold per surface cubic meter = 12,000,000 grams gold or 387,096 ounces or $503,224,800.00 at $1300 per Troy ounce

15% of 12,000,000 grams= 1,800,000 grams or 58,064 ounces or $75,483,200
That is with a one gram average of a 1cubic meter of pay dirt dependant on depth of overburden.

It is quite probable that the pay layer is significantly better in that 15% limit of area to mine than one cubic meter pay layer which would account for the initial and continued increase of recovered gold to a consistent level of production. It is very possible that their pay layer is greater than one cubic meter and their Estimates of reserves are reasonable.

The only picture that tells it all is the one showing their sluice box. Its old school and also very inefficient.

even the best sluice box's today without a concentrator off the end of it loses up to 30% of their fine gold. Check out the efficient wash plants here. http://www.goldlands.com/

GYST assays from the geological report show from (simple even numbers) .5 to 1.5 grams per cubic meter. so for simplicity, lets say 1gram of gold per cubic meter over all in the pay layer. below is the geological report on the Gorilla from their website.

https://docs.google.com/file/d/0B4T1iRDs4VPKODQzNjhlM2YtOWFlMC00MzVkLWEwNDgtNTcyNjIxZGU0OGFm/edit?hl=en_US

Below is a link to a example performa based on 1gram of gold per yard of pay material at 60yrds per hour and based on one shift per 24hrs for a season from the beginning of April to the end of October. From what I understand about Peru, their season of mining can potentially be year round

http://smresources.ca/PerformaApril1toOct31.pdf

By those numbers and their geological report, I can understand their enthusiasm. Its that enthusiasm that has fed into your perpetration of them pulling a scam on investors. The people of GYST underestimated the complexity of their project. I believe that that is more due to inexperience than anything else.

The reference of "coarse gold" in the geo report indicates that the source of the gold is very local and good mineral veins will be in the immediate area (also as described in the geo report). However, they are focusing too much (partially from necessity from inefficient equipment) on the coarse gold and taking losses on the finer gold that is literally running off the end of their sluice box. In their condition as is, the only way (off the top of my head) they could possibly combat that is to build a cement pond catcher (mounted on skids) off the end of the sluice box and have a quarter inch screen set up to capture the fines into the cement pond while discarding the larger material into a tailing pile. The catcher pond can be panned out or assayed/metallurgical report and sent out as concentrate.

Its possible the people at gold lands or another wash plant company may have an interest in supplying equipment for a share of gold and/or some shares in the company.

With your reference to Asher. Asher is a toxic lending company that has buried many a company with what you described as dumping millions of shares onto the investors. This leads me to ask, where are you going to find a bank to lend money for a mining project? Finding a bank to lend money on such a venture is near impossible (I should know). Banks only lend money to those who Don't Need It or mines that have a N43-101.

The other big problem they have is the overburden. In this case clay that has to be stripped away to get into the pay layer (looks like anywhere from 4-6 feet of it). An excavator will solve this, mind you, I would rather a D8 cat for stripping. In their place with limited resources a excavator for now is a good way to go until they get more working capital for good equipment.

Placer is one of the most difficult operations to get off the ground simply because of the start-up capital but moreover because of the N43-101 instrument introduced as a requirement to qualify on the larger and more credible markets than OTC but also as already mentioned on the lending practices.

An N43-101 is more suited to hard rock as it can give definite and consistent numbers of gold per ton in the vein whereas in placer, your reserves can vary widely as you can see in the geological report for the Gorilla project. Thusly, a N43-101 report is near impossible as you have to effectively mine the ground to know exactly what you have. It is a catch 22.

Check out the history of when and why the N43-101 instrument requirement came out. It was the result of a company in the 80's that drilled a bunch of dry holes in a foreign country only to salt the samples from gold filed from the dudes wedding band. It was literally the scam of the century.

In this case based on the inefficiency of GYST equipment, I can safely assume that they are not even skimming from the sluice box let alone perpetuating a market scam...they are just losing a fair bit of gold off the end of their sluice box. I would estimate at least 30% of their assays and up to 70% of the assays

in summary, the DO list priority for these guys

1) either drastically improve the efficiency of their wash plant or replace it with a more efficient model.
2) get their excavator

The DON'T list

1)Never exceed the capacity of your wash plant. Efficient miners get rich. Yardage miners go broke.


The sampling procedure was detailed on page 39 of the geo report for the Gorilla. What they did were test pits by hand to retrieve their samples. It looks like from the results that they did a fair number of hand test pits that were sent for assay. there is a pic of the test pits dug by hand. They used a iron rod to determine the depth of over burden. its a simple procedure really. they pound the iron rod into the ground and know how deep the clay is by the ease or difficulty of pounding the rod in. the rod will pass easily through clay and when it hits the gravel layer will bounce. Take your measurement and vohlah, you have your depth.

I can see why they are concentrating on Peru. For one the labor cost there is far less than say Canada or the States. The other advantage is that historic operations would laugh at 1gram per yard of material but as you can see from the performa example I provided that 1gram per yard is quite rich in this day and age.

Also, I think Peru is more friendly to placer mining then say Mexico...I know of one contact who has good grade on the rivers in Mexico but having a gun shoved in your face on clean up is very much a hazard. Pretty hard for the law to recover raw gold from thieves when the police are as corrupt. Only a gold smith possesses the expertise to determine what area a type of gold came out of. Other than that, gold is near untraceable. Very easy for a situation to go bad.

larger companies are primarily tied up with hard rock (veining systems) where they can at least obtain a N43-101 whereas I already described about the difficulty of that for a placer operation. For placer the OTC is the only hope one has to raise the money to go mining as you only require a prospectus report (written by a geologist) to meet the requirements of the OTC.

Their sampling was pretty good in my opinion but I can appreciate your concern over the detail. However, the report seems good enough for the powers that govern the rules for the OTC.

I will take your word for it on Howarth's resume. From a business perspective he saw this as I would see it. A good opportunity, however, he is learning as he goes...lol. Maybe they did BS a little bit, I can't speak to that and I can appreciate your view on investors getting led to the slaughter. However, they have their foot in the door to make this a good venture.

My hope is that they will get themselves a better wash plant and then get an excavator. A new plant is about $60-100k but I am not sure what the cost would be to ship it to them. It would be far better to just purchase the steel and hire a guy to fabricate the plant out there. That would probably cost far less...say $30k

Wouldn't take much to build a good sluice box and then perhaps either build a concentrator or just buy one to fit on the end of the sluice box.

But yeah...gold rush show for sure lol! if they do enough video clips of what they are doing, they could easily put that forward and pitch it to the series on History. They have enough natural drama to where they wouldn't have to create it.

My honest opinion on GYST is that they have a number of advantages. The first is that they are in a country where wages are considerably lower than Canada or the US.

The second thing is that what they are attempting to do is what a lot of smaller operations attempt to do and that is make multiple smaller projects viable. Start with one project and advance into a second and a third etc.

The projects they are doing is likely not large enough of a resource to qualify interest for a large company to come in. For GYST to be bought out by a large company is possible but fairly unlikely unless of course they land a whopper of a resource (we are always looking for that mother load)

The Size of a resource is the Achilles heel of large companies as they are such large companies that it limits what projects they can do. For a little guy company such as GYST, such small projects can be viable by the number of projects rather then one huge one.

Permitting on smaller projects is much easier whereas the larger companies can be tied up with permitting for years. with permitting it is the size of the footprint you are making rather then the number.

The third biggest advantage is efficiency. Mining and Processing material efficiently is key to a successful operation. A large company most often ships their ore out raw and a significant amount of return is lost on the cost of transporting raw ore and the processing of raw ore through a third party.
A small operation can process on site to a concentrate level and then ship that out.

GYST can double their production by simply adding another shift to run 24hrs per day. The longer they can hold onto their physical gold is also critical. Gold is at $1300 per ounce. It was average $500 per ounce 10 years ago and peaked just shy of $2000 per ounce not long ago. Very high probability that gold will reach a stable level of $2000 per ounce at some point in the future.

I know everyone here is abhorred to the thought of a reverse split but I am fairly certain that it will be done at some point in the future. either that or a quiet buy back while this is in the trips and then retire shares. Its what I would do in their place if all else fails to get the third operation going. The third operation will likely be the profit margin.

A healthy PPS and OS with room to issue shares (within reason) for acquisitions of claims, contractor work, drilling work, purchasing of equipment etc is almost a necessity for the company to grow.

These guys survived Asher and are in production...

What got me interested was on the website. They showed a blip of what they (GYST) are contributing to the local economy. Keep in mind this is the same country that world vision sponsors kids. They were donating school supplies etc for the local school. In a way, the mining is creating employment and a hand up rather than a hand out to the people.