Victims of Success

Mike Hoy
February 8, 2006

Welcome to 2006 and the spoils that belong to the victorious

I believe we have entered a period of time where most investors will appear to be geniuses when they look in the mirror. This is what being in the right place at the right time is all about. The old cliché of "a broken clock is right twice a day" is the one thing that investors must recognize about the precious metals and natural resource markets we have today. I have waited a very long time to be in the position that we are now in. I am also looking forward to hearing and reading about the stupidity that follows being able to" Walk on Water." Many of these people will confuse being able to "walk on water" with walking in water that is only a quarter of an inch deep. I am seeing the beginning of some serious exaggerations by a few people who are currently enjoying success.

It is very important for each of you to do your own homework, with an open mind, so that you may be able to separate the fact from the fiction and reality from wishful thinking. The fact that a property may have great potential, or even large proven reserves, does not necessarily mean that production is a given. There are many properties with economic ore bodies that have never been put into production and probably never will. The number one reason these properties never see production is the fact that permitting is an obstacle that simply cannot be overcome for one reason or another. These properties just seem to get passed down the line to the next company that wants to take a shot at "beating the odds." I believe that many of the stories and articles I read today are in essence the same thing as "buying a car without taking it for a ride." You never really know what you are getting if you don't; and even if you do go for a ride you still have no assurance the car will not be a "lemon" until it is too late. What do you see when you look in the mirror at this point; can you say "BAGHOLDER?"

After nearly 30 years in this business I have learned many things. The last 20 years have taught me that one may have all the answers but that does not make him right. Timing, right now, is the most important factor which, in the end, decides whether an investment will put you into the "poor house" or on "easy street." Right now the timing is perfect for making easy money in the precious metals industry.

Many young inexperienced investors and prognosticators are going to confuse their success with having the game figured out; when in reality they are simply in the right place at the right time. Their youth and inexperience will give them away down the road. There is no monopoly on pride, arrogance and ego.

As investors we must never forget the lessons history has taught over and over again. The most recent lessons were taught when the Tech sector was crushed. This ugly ending should never be cleansed from our minds. It should serve as a "Certainty of Life" when it comes to investing. The stupidity surrounding the rise and fall of the tech sector is legendary. We must never forget the insanity that swept the investing community as the book was closed on "The Rise and Fall of the New Economy!"
I will never forget the man who once said to me, the week the NASDAQ peaked out above 5000, that I was stupid for not owning tech stocks. All I could do was look at him and smile. There is no way he could understand what I wanted to tell him; so, believe it or not, I didn't say a word. I just smiled and laughed.

By the time the end is ushered in on the "Golden Era" the craziness of the "Tech Sector" will look like "Child's Play" in comparison to what will have gone on in the precious metals sector. I can't wait to see the things that will be written by many as this "Bull Market of All Bull Markets" unfolds.

Without a doubt we are in for some very interesting times. Cocktail parties are once again going to be very lively as stories of success, wealth and perfect timing will monopolize the conversation; most of it stretched just a bit.

Enjoy the ride! The next year or two we should have a very prosperous and fun experience. I hope that I have the good fortune of being able to liquidate my positions within 20% of their ultimate highs. My fear is that I will take my money off the table way too early. Even if I take my money off the table too early I should never have to worry about my financial future.

UPDATE TIME ON THREE STOCKS IN MY PORTFOLIO

I have waited a long time to bring you this update. I have done so for a very good reason; many things are going on with the stocks in my portfolio and I am very happy to say that I am real excited about what I think the future holds. Not only do I think the future is going to reward me with a return of many times on my invested capital but I think the timing is just perfect for those who are looking to begin establishing positions in a couple of stocks that I own.

The past couple of months have set the stage for the future in several of my companies. I am very pleased with the progress of management in building "true wealth" for the shareholders of these companies. I suppose that the credit must go to management and the teams that have been and continue to be developed. I say true wealth because these companies are rapidly moving towards production and with production comes the beginning of a whole new ballgame.

NOVAGOLD NG

I am very pleased with the results that Rick and Greg continue to deliver. I view the success that NG has as a "poster child" for all "wanna be" junior mining companies. NG has entered an era where it is now going to fall into the same category as the big boys.

Production is slated to begin at Rock Creek within the next year and a half taking it into the "Producing Category" of precious metal companies. I really like the idea of seeing that first mine being put into production. Actually it is the first of several that will come into production between now and 2010. I am not going to go into detail of all the things that NG is going to accomplish between now and 2010 but suffice it to say that the party is just beginning to start at NG.

As the bull market in gold continues to unfold over the next several years I believe you will see NG at the top of the list of favored companies to own. This company should become a core precious metals holding of all mutual funds. With the diversification of properties within the company coupled with highly successful drilling programs leading to eventual production I am very pleased to view NG as my core holding.

Another thing I view as vitally important is the fact that the stock is held in the right hands. For over a year I have viewed NG as a buyout candidate. The stock is tightly held in the hands of investors who are very friendly towards the management of NG. This means that a buyout can only happen if the management is in favor of being bought out. I much prefer NG to develop their properties internally before a buyout comes along. I have many times said there is not a major company out there that I would willingly trade my NG shares for. In fact, I would not own a major in preference to NG. Why? Because I want to own the companies that the majors will be forced to buy to increase their reserves do to depletion from mining and the lack of exploration through the twenty year bear market.

NG is a company that is developing beautifully. Having purchased the stock at much lowers levels I see no reason to worry about any corrections that may come along. NG is my savings account and it is paying returns better than any bank or money market I have ever heard of. I will accumulate additional shares on any pullback.

GOLDREA RESOURCES: GOR.V :: GORAF in the US Markets

Larry Reaugh had a very successful trip to China in early January. Goldrea is in a position to purchase 100% of the project in the Shandong province of China. I feel the next 2-3 years could turn GOR into a highly successful foreign mid-tier gold producing company in China. Right now GOR is in search of a Chinese contractor to begin driving drift that will establish cash flow as production begins from our bulk sampling program.

Once the 43-101 is complete we can then talk about exactly what we will have; PRODUCTION!

With any kind of luck a year from now, or earlier, we should be at full production capacity on the mill and I expect to be a very happy shareholder.

Right now we have a letter of intent to purchase the whole "ball of wax." This LOI will buy us the time to properly perform all due diligence and allow our stock to move up in price so that dilution from the buyout will be kept to a minimum.

This is exactly the type of stock I want to own going into this next phase of the bull market in gold. To go from a junior mining company to a producing company is a huge step forward. I would like to go into more detail; about the letter of intent and the positives of the purchase but I am going to keep my thoughts on that subject at this point in time, to myself. Needless to say I am very excited and the next year for GOR should be very rewarding to each and everyone who owns stock in the company.

The recent upside breakout in the price of the stock is telling me that others are following the story as well.

As most of you will recall from my prior articles; this is the category of stock that I was referring to as being difficult to purchase because of the lack of supply. I feel that liquidity will greatly increase as the price of the stock rises. For those of you who attempted to buy with any kind of size you know exactly what I am talking about. Now the stock is much higher and the stock you were able to accumulate at the old levels looks to be a pretty good purchase. As the stock moves from these levels you most likely will be the center of attention at the cocktail parties.

With the stock having moved from the $.25 Can. price level to a high of $.56 Can. the stock is taking a little bit of a breather before moving higher. Even though I have a large position in GOR I am building my position because I want to own as many shares below $.50 as I can accumulate because I feel the stock a year from now will be substantially higher.

Remember, it is important to understand that a year from now as gold moves much higher it will be very difficult, if not impossible, to find any company associated with gold trading below $1.50/share. Now throw in the fact that GOR will be taking gold out of the ground and who knows how crazy things will get.

True wealth is not created by owning an investment that gives you a return of 10-20 times on your investment. True wealth is created in the number of shares an individual owns. There is a world of difference between owning 10,000 shares of a stock @ $10/share versus owning 250,000 shares. The leverage of being able to buy below $.50/share enables an individual to accumulate a much larger position than buying at $2-$3/share. I want to own as many shares of stock, in companies like GOR, as I can because this bull market will take companies, like GOR, trading below $.50/share and send them the way of the dinosaur. Gold companies trading below $.50/share simply will have vanished off the face of the earth. A year from now we may look back and regret not buying as many shares as we could get our hands on. As for me I plan on having no regrets!

ADANAC MOLY CORP. AUA.V :: ANCGF IN THE US MARKETS

I am equally as excited about AUA as I am GOR. I get a real charge out of competing moly companies and the success that their public relation programs and investors are achieving right now. I tip my hat to them as I just love what their apparent success means. Before I explain what I mean by this last statement I think it is necessary to bring each of you up to date on the successful progress that is being made by Larry and his team at AUA.

1) The full feasibility is in the process of being completed. This feasibility study is being completed by the world's most reputable companies, in their respective areas of expertise. This feasibility will give each and every entity a complete picture of the plans and cost associated with putting Ruby Creek into production. Larry Reaugh is totally committed to bringing production to Ruby Creek and this feasibility study has been performed to give each party interested in working with AUA a complete picture of what needs to be done and the costs associated with getting the job done. The full study should be complete at any given point in time and hopefully available to all in the month of February.

2) The permitting process is underway and moving ahead smoothly; or at least as smoothly as can be in the permitting process. The beautiful thing about Ruby Creek is the fact that this project has been fully permitted in the past. Placer fully permitted this project in 1980 with the full intention of going into production, before moly prices fell. Placer chose to exit the base metals business which is how AUA was able to acquire 100% of everything. Knock on wood and keep your fingers crossed because if all continues to go as planned we should be fully permitted by mid-year. Regardless of when the permits arrive this project appears to be wanted by all. Excellent work Larry, Mike, Ed, John, Frank and everyone else.

I believe these two points separate the men from the boys. AUA is miles ahead of its competition in putting Ruby Creek into production. We all know that the planned production will be 20,000t/day of ore processed with a yield of 35,000-40,000 lbs of pure moly per day at of cost of what should be less than $5/lb. The full feasibility will outline the specifics and even then the numbers will probably be very conservative.

The point of all this is the fact that all the steps necessary to achieve production are happening right now, and in the final stages at AUA. None of these other companies have even begun to enter the same stage of development that AUA is about to exit. In other words they are still "a gleam in their daddy's eye." They all talk but until they have performed the same tasks that AUA is about to complete they are only speculating on what they think Once they have spent the money and completed the necessary steps that AUA has completed; only then will they be able to compare themselves to AUA. This is what being first is all about!

Why would an investor or a major source of financing look beyond AUA when the internal rates of return more than justifies being involved in AUA and Ruby Creek? Why would an investor or a major source of financing consider another company when they have not spent the money to back up many of the claims they are making? As for me, I want to be associated with the first to go into production. After all, who remembers second and third place?

Some of the stories I hear and read are very enticing. They sound like very good investments. The market has opened their pocket books and multiplied the value of some of these stocks. I think this is really neat as I know this is telling me what will happen to AUA when the street fully understands the truth about the moly market and the stocks that really are going to surface as being real.

With AUA finishing their full feasibility and well into the permitting process there can be no mistake as to who is serious about going into production. The production costs and capital expenditures that are being thrown about by other companies mean absolutely nothing if they are not backed up by a reputable firm willing to stake their reputation on the findings.

Another very important point to address deals with the potential investors looking to come up with the capital to put Ruby Creek into production. The list of potential suitors continues to grow. I really don't have any specifics to release at this time as the potential suitors and Larry are just getting to the point of sitting down and getting serious. Before any real serious negotiations can commence these investors must have a feasibility study to determine their true level of interest. The fact that there exists as much interest as there is speaks very highly for the project. Make no mistake about it; this project is real and there is plenty of interest behind the scenes.

I am also glad that the offtake agreement with Traxys expired. I have a feeling that when the final chapter is written on the financing of Ruby Creek there will be some real surprised people out there.

This brings me to the inevitable point of asking myself the one obvious question; WITH SO MUCH RIGHT GOING ON THEN HOW COME THE PRICE OF THE STOCK IS NOT REFLECTING THE ACCOMPLISHMENTS OF MANAGEMENT? What a great question! I wish I had an equally great answer. There are many serious investors, funds, analysts and potential suitors who are fully aware of the progress being made by AUA. Many of these people have already sat down with Larry and are there in the wings waiting to strike. Why they have not stepped in to accumulate positions is beyond me. I would very much like to know what they are thinking and what they are waiting for. The volume in the stock is telling me that someone is accumulating shares on a regular basis. The fact that the stock has begun to climb and volume is increasing is telling me loud and clear that the days of watching, looking and waiting are coming to an end. I also believe many are waiting for the full feasibility to be completed. If this is the case then the next couple of months could be real interesting as the results become public.

The main reason I see for AUA being the laggard that it has been, when they are clearly the front runner everywhere else, lies in the fact that the corporate interest is focused on getting into production versus promoting the stock. I guess that Larry has better things to do, such as putting two companies into production, rather than concentrating on promoting the price of his stock.

When you fully examine the opportunity created by this lack of interest I have to recognize the opportunity created on the other side of the equation. The only way to take full advantage of this is to add to positions as opportunities avail. Like GOR, I believe a year from now we will look back and wonder why we let opportunities like AUA and GOR slip through our fingers without making an appropriate investment dictated by the development of the companies.

There is no way that anyone will convince me that the stock price appreciation enjoyed by Augusta, Idaho General and Blue Pearl is not eventually going to flow into Adanac Moly Corp. Not only will it flow into AUA but make no mistake that the day will come when the true investment capital will understand who the true "undiscovered and undervalued company" is when it comes to the moly industry. There is no way that AUA will continue to be overlooked.

The real easy way to understand this point is to ask yourself several questions about the work status of the projects in the other companies.

1) Do any of these companies have a full feasibility report completed by reputable third parties?

2) Are any of these companies in the process of doing a full feasibility report by reputable third parties?

3) Are any of these companies in the permitting stage? Have any of these companies applied for any permits?

4) Are any investors or major companies in contact with any of these companies looking to finance their projects?

I think you will find that none of these companies have made much progress along these lines. If my thinking here is correct then I think a switch into AUA could be a very timely trade.

Clearly, AUA is the undisputed leader in bringing their moly project to production. AUA also has several other projects that offer great promise; I would talk about them except for the fact that that would put me in the same category as everyone else talking about their "wanna be" projects.

When push comes to shove, I believe the project that comes into production first is the project that the serious money is going to get heavily involved with. I believe that one day investors are going to recognize this same point and there will be a rush to take profits from the companies that are talking about being in production one day; to invest in the company that is going to be the first to take moly out of the ground.

This brings me to my last point that I want to make about AUA.

I am real surprised that sophisticated investors, mutual funds, pension plans and corporate investment funds have not started accumulating positions of size in AUA. I would think that the advanced stage project of Ruby Creek would easily warrant an investment of size in AUA. When I think of a mine that will produce 35,000-40,000 lbs/day of moly at a cost of less than $5.00/lb. I have to wonder why they haven't stepped up to get a piece of the stock in the open market.

This project will require a capital expenditure of roughly $350,000,000-$400,000,000 to put into production and at this point in time there is no shortage of interest from outside companies looking to finance this mine. Eventually someone is going to come to an agreement with Larry after they have seen the full feasibility report. The point I am trying to make is that the total market cap. of AUA is roughly $60,000,000.

Now compare a capital investment of $350,000,000-$400,000,000 for a piece of the pie to owning the whole pie with a market cap. of $60,000,000. As you can see the only thing about AUA that is out of line is the value of their stock. This is not a problem but a terrific opportunity for those who recognize the potential. Just think for a moment; 10% of this company is worth about $6,000,000 at today's market prices. What would be a better investment than owning 10% of a company that is going to produce 35,000-40,000/lbs./day of pure low cost moly?

AUA will produce roughly 12,000,000 lbs. of moly/year; if one just considers conservative margins of $10-$15/lb. you are talking a net of $120,000,000-$180,000,000/year. All this in a company with a market cap. of only $60,000,000.

This is what mining is all about! Yes there are billions of dollars worth of reserves in the ground and billions more to be found as additional drilling is completed down the road; after all the resource has not been completely drilled out.

Yes ladies and gentlemen this is my moly stock. The big difference is my company is going into production and not just talking about it!

For those who want a complete update I suggest you give me a call at the number listed below.

I plan on writing more often in 2006. These are very exciting times we have in front of us and I want to make the most of what I feel may be the greatest financial opportunity of my life. I hope the writing that I share with you will help make your investment decisions a little bit less complicated.

Thanks for reading! Feel free to call (402-483-4484) or e-mail with any questions.

Adanac Moly Corp website
Goldrea Resources website
NovaGold Resources website

DISCLOSURES

I am a paid consultant of Adanac Moly Corp and Goldrea Resources. I also own large positions in both these companies. I have every share of stock that I have ever purchased, in Adanac and Goldrea and I have no intentions of selling any Adanac or Goldrea stock at anywhere near these prices.

I have not received compensation nor have I ever received compensation of any kind from NovaGold Resources. I own stock in all three of these companies.

My opinions on each of these companies is just that; my opinion. It is up to each of you to do your own due diligence to decide whether or not an investment in any of these companies is appropriate for you.

For those of you on my e-mail list you should have received this article over the last week. For those of you who are not on my list just click on the e-mail link below and ask to be added on. There is no charge for being on my e-mail list and my e-mail list is confidential.

Enjoy the ride as it should be a whole lot of fun! It is nice to be in the right place at the right time!

tel: 402-483-4484

mhoy@neb.rr.com

Mike

321gold Inc