The Trading Floor

[Arctec]

Weekly Update March 4, 2007

--------------------------------------------------------------------------------

Hudson Resources (HUD.V $1.21)

What a difference a year makes ! Hudson was originally featured December 5th 2005 at $0.36 and ten days ago was trading at $2.30 (gain of 539% at its peak). Our last updates came late 2006 in the 0.80's but underwhelming diamond results last week resulted in heavy selling (it also didn't help that the overall market was selling off). This only emphasizes what we've always said with small and microcaps - the importance of selling in stages when gains present themself. With Hudson, the market was looking for something more substantial to indicate their deposit is economic, and we haven't seen that yet. Diamond plays take a long time to mature and this one is proving no different. At this stage I believe our coverage of Hudson going forward will be very limited.



Bioscrypt (BYT.T $0.85)
www.bioscrypt.com

Last updated Jan 8/07 at $0.60, we were fortunate to watch BYT gain 100% by early February. Its been under pressure this past month but it remains our best tech in the security/biometric space for 2007. Financials were released Wednesday and were in line with expectation. They reported $5 million in revenue for Q4 with only a small loss (this was important to see).




Gryphon Gold (GGN.T $1.02)
www.gryphongold.com

We started coverage mid $0.70's in December, a few weeks after the stock collapsed from $1.40. It fell hard after announcing revisions to a feasibility study for its Nevada-based Borealis gold project due to an over- estimation of the resource (the study was done by Samuel Engineering, an independent consulting firm). The result was a lower annual gold production and higher per-ounce production costs. A financing and decision to proceed with production were therefore delayed.

Thursday afternoon the company released excellent drill results and the stock initially ran to $1.20 on strong volume before correcting near close. These are only the first 3 holes of a $4.5 million 72 hole drill program in their Borealis district. Of particular importance is a drill intercept of 165 ft grading 0.21 ozs/ton (7.3 g/tonne). As previously indicated, the exploration potential on this property is excellent (in addition to what they already have) and these first few holes are a very good leading indicator.

Comments (below) from my update to our paid subscribers on Jan 12th are applicable.

Tonight they provided the results of the re-estimation of their gold resource model making it 43-101 compliant (TSX strict guideline). The importance here, is that they are proving they have the following gold reserves on their Borealis project in Nevada;

Measured & Indicated 1.2 million ounces / Inferred 0.6 million
silver - approx. 8 million measured and indicated, 8 million inferred

A good way to reduce risk when speculating on gold stocks, is to use a valuation model that is quite conservative. Even with gold near $600, you still need to discount a tremendous amount to arrive at a realistic value. This includes operating costs, discounted cash flows, capital costs of a mine, etc. etc. - in a hot sector 90% of investors would just throw this notion out the window but in this market, you cannot afford to do that.

I have found an excellent benchmark is to use U.S. $25/oz. of gold in the measured & indicated category (when 43-101 compliant and if the grade is at least 2 grams/tonne). If we apply this to GGN's current reserves on Borealis, we can value this property at $30 million U.S. and throw in another $6 million for the inferred ($10/oz).

Rough estimates then peg fair value at $36 million U.S. X 1.12 / 41 million shares outstanding. This would realistically make their 1.8 million oz. of gold worth $0.98/share cdn. This excludes the silver. This also excludes their neighboring Graben zone which has proven approx. 1/2 million oz. and which should add another $0.30/share in value. Interesting to note that last year they hit a very strong hole of 556ft averaging 3 grams per ton on the Graben zone.

So realistically, this deposit should carry a value in the range of $1.30/share. Their property encompasses approx. 30 square miles and there are six known similar geological targets for exploration in 2007. Existing shareholders were (are) very upset that this project never went into production, but treating it purely as an exploration play, means we can still assume very good risk while they continue to drill in 2007.




Danny Deadlock
Microcap.com

--------------------------------------------------------------------------------

email: [e-mail]
web: http://www.microcap.com