Guyana Gold Corp. (Pink Sheets: GYGC) is a junior mineral exploration company focused on gold mining operations in the Latin American nation of Guyana. The Company identifies, acquires and develops precious and base metal properties, and assesses the commercial viability of new discoveries. GYGC recently announced a joint venture proposal with its partner, Octagon Mining Corp., to acquire additional gold claims in the Barima-Waini region of Guyana. GYGC also announced its plans to further develop its Port Kaituma gold project, which is also located in Guyana. The Port Kaituma property is currently producing about 100 ounces of gold per month; and equipment has been purchased, which will likely increase production to around 250 ounces per month. In June 2008, GYGC announced the close of an equity private placement that raised $500,000 in new capital, which will be used to fund the Company's operations in Guyana, including, but not limited to, drilling and exploration, the purchase of additional mining properties, entering into new joint ventures, increasing production and sampling.

Gold claims in producing regions of Guyana

The Company is increasing its presence in areas of Guyana that have an established track record for gold discoveries and commercial production. Guyana is situated on the mineral rich Guyana Shield, an area which has attracted some of the world's largest mining companies. Mining is a major component of the Guyanese economy, contributing more than 10 percent of GDP and about 40 percent of exports. The Guyana Gold Board's (GGB) liberal policies regarding exports, licensing and mining creates a favorable climate for outsiders investing in Guyanese mining operations.

Joint venture to further develop Port Kaituma Project

GYGC's proposed joint venture with Octagon Mining Corp. to further develop the Port Kaituma project will expand the Company's land position, create operating synergies, increase revenue opportunities, accelerate the recovery of capital costs and extend mine life. Octagon has also submitted an application to the Guyana Gold Mine Commission to acquire additional gold claims in the Barima-Waini region. This proposed acquisition may prove strategically important for both partners since it encompasses a large area geologically similar to the already producing Port Kaituma region. If the acquisition closes, GYGC would control 572 mining claims covering approximately 13,637 acres in 13 blocks.

Port Kaituma production will double next year

In June 2008, the Company announced the purchase of underground mining equipment by its joint venture partner, Octagon. The new equipment will enable an increase in monthly gold production from the current 100 ounces to approximately 250 ounces. At conservative $600 per ounce gold prices, the value of monthly production rises from $60,000 to $150,000.

GYGC benefits from soaring gold prices

Rising demand for gold in industrial and investment applications has fueled a steep rise in gold prices from around $600 per ounce in 2006 to $700 per ounce in 2007, and a record $1,000 an ounce in March 2008. Gold demand by exchange traded fund investors has risen more than 100 percent this year. Merrill Lynch recently raised its outlook for gold prices, and expects prices to average $925/oz. in 2008 and $1,000/oz. in 2009.

$500,000 capital infusion helps fund 2008 business plan

GYGC recently closed an equity private placement that generated net proceeds of $500,000. The proceeds will be used to help fund the Company's operations in Guyana, including its drilling and exploration activities, and will assist in the financing of the purchase of additional mining properties and joint ventures. In addition, the Company is pursuing a co-listing for its shares on the Frankfurt Stock Exchange. A listing on a major European exchange would improve the Company's access to capital, help attract additional institutional and private investors and enhance GYGC's visibility in the marketplace and share liquidity.

Experienced management team

Eduard Arnov, GYGC's president, has extensive experience in natural resource project financing and investment banking. Moreover, his knowledge of Guyanese geology and prior involvement in Guyana mining operations since March 2000, provide an added advantage. Gordon Nestor, GYGC's project manager and lead geologist, has served as a geotechnician and senior geologist for the Guyana Geology and Mines Commission.

$ 226 billion global nutrition industry

The Company plans to develop a balanced global portfolio of early-to-advanced stage mining projects through exploration, acquisitions and joint ventures. In June 2008, GYGC announced a proposal for a joint venture from its partner Octagon Mining Corp. to further develop the Port Kaituma Project. The joint venture will increase the Company's land position and increase the scale of the Port Kaituma Project. This operation is currently producing around 100 ounces of gold per month, and equipment has been purchased, which will increase production to 250 ounces per month. In addition, the Company plans to build a modern processing facility at this site which will greatly increase gold recovery rates.

GYGC also recently announced that its joint venture partner Octagon submitted an application to the Guyana Gold Mine Commission to acquire additional gold claims in the Barima-Waini region. The claims it hopes to acquire consist of seven blocks, with each block consisting of 44 claims, for a total of 308 claims. Combined with the Company's existing holdings, this would increase GYGC's land position to a total of 572 mining claims covering about 13,637 acres in 13 blocks. The Barima-Waini region is geologically similar to the Port Kaituma region, which is already producing gold in commercial quantities. The table below shows the Company's land position, assuming the Barima-Waini land acquisition closes.

Exhibit1: GYGC mining properties

Source: Company website, Business Week

GYGC is currently focused on gold projects in the Caribbean. In Guyana, the Company's key mineral project is located in the region of Port Kaituma. The Company plans to grow through exploration and drilling activities, acquiring additional mineral properties and forming joint ventures. GYGC recently announced a proposed joint venture to further develop the Port Kaituma Project that presents excellent opportunities to increase revenues and production, extend the mine life, and accelerate the capital recovery costs of modernizing the Port Kaituma mine. This project is currently producing 100 ounces of gold per month; production is expected to rise to 250 ounces per month following the installation of new equipment.

The Company recently raised $500,000 through an equity private placement, which will be used to fund its mining operations in Guyana. In addition, management believes the European markets offer excellent fund-raising opportunities for North American junior mineral exploration companies. Accordingly, GYGC is pursuing a listing for its shares on the Frankfurt Stock Exchange. In addition to improving access to financing, a major European exchange listing will help the Company attract new institutional and private investors, enhance GYGC's visibility in the marketplace and improve share liquidity.

Source: Bureau of Statistics & Ministry of Finance (Guyana) & IMF

Source: Bureau of Statistics (Guyana)

Guyana is an emerging economy with vast, untapped mineral potential. This country's real GDP growth increased from 5.1 percent in 2006 to 5.4 percent in 2007, and is forecast at 4.6 percent in 2008. The Guyanese economy is growing because of stable macroeconomic policies, favorable business conditions, and attractive incentives for outside investment, which include a uniform corporate tax code that doesn't discriminate against foreigners. Mining is a prominent segment of the Guyanese economy, accounting for over 10 percent of Guyana's GDP and about 40 percent of exports.

In the mining and exploration industry, the government is pursuing significant new investments (particularly in gold and bauxite mining) that can improve operating efficiency and mine productivity. To accomplish this goal, the Guyanese government has created a system based on royalties and fiscal incentives to enhance the attractiveness of mineral exploration and production projects. In 2007, the Guyana Gold Board (GGB) recorded record gold production volume of 240,000 ounces of gold, up 16 percent compared to 2006. The GGB also granted licenses to certain dealers to pursue private purchases and export, which led to exports of 6,900 ounces of gold valued at $4.3 million.

Guyana's mining industry has attracted many of the world's largest mining companies. Recent significant gold discoveries by Guyana Goldfields Inc., Strata Gold Corp., and Sacre-Coeur Minerals Ltd., along with a major exploration presence in the country by Newmont Mining, have placed Guyana to the forefront of the gold exploration sector. The main mineral interests in Guyana are gold, diamond and bauxite and, recently, semi-precious stones.

The country is located in the heart of a prolific gold region called the Guiana Shield, which also encompasses parts of Venezuela, Suriname and French Guiana. Geologically, this is believed to be the broken-off extension of the West African Shield hosting the Birimian gold belt in Ghana where at least 100 million ounces of gold has been identified to date.

Guyana's untapped gold resources are estimated to exceed one million ounces. Rising gold prices are encouraging mining operations in areas of Guyana where production was not previously commercially viable.

Gold is one of the few metals that, irrespective of its form, retains its high value and has multiple uses in the global economy. Gold is used as jewelry, as an input in the industrial and technology sectors, in dentistry and is purchased by investors as a hedge against inflation.

In 2007, global demand for gold increased 3.3 percent to 3,516 tons. The value of demand rose 19.7 percent to $79.25 billion. Gold prices jumped 31.8 percent in 2007 to $836.15/oz., and crossed the $1,000/oz. mark in 2008.

Exhibit 4: Identifiable gold demand in tons

Source:World Gold Council

Exhibit 5: Gold prices (1999-07)

Source: Thomson Financial Data

Following robust growth last year, global gold demand declined in the first quarter of 2008, reflecting significantly higher gold prices and unusually high price volatility. Gold prices have already reached $1,000/oz. this year, and demand is expected to remain strong due to the proliferation of gold-based exchange traded funds. Merrill Lynch recently raised its outlook for gold prices and expects prices to average $925/oz. in 2008 and $1,000/oz. in 2009.

During the 2008 first quarter, jewelry demand declined while demand for gold exchange traded funds (ETFs) increased 100 percent year-over-year to 73 tons. Investment demand for gold reflects the instability of world equity markets, ongoing inflation fears, the weak dollar, and increased respect for gold's investment attributes. As a percentage of total gold demand, exchange traded funds have increased from 7 percent in 2006 to 10 percent in the first quarter of 2008; further gains are anticipated.

Exhibit 6: Composition of gold demand

Source: World Gold Council

GYGC competes for properties, financing, workers and other resources with other gold mining companies operating in South America, several of which are described below:

Newmont Mining Corporation (NYSE: NEM)

Newmont Mining Corp. produces gold and copper from mining operations in the United States, Australia, Peru, Indonesia, Ghana, Canada, Bolivia, New Zealand and Mexico. The company also has exploration and merchant banking operations. It has proven or probable gold reserves of approximately 93.9 million ounces, and an aggregate land position of approximately 44,470 square miles (115,200 square kilometers).

Barrick Gold Corporation (NYSE: ABX)

Barrick Gold Corp. is a gold and copper mining company. It sells gold bullion in the gold spot market, gold and copper concentrate to independent smelting companies, and copper cathodes through various sales contracts to third parties. The company operates in North America, South America, Australia Pacific and Africa. North America is the company's largest production area, representing approximately 46 million ounces of proven and probable gold reserves and 15 million ounces of measured and indicated resources.

IAMGOLD Corporation (NYSE: IAG)

IAMGOLD Corp. explores for mineral resources around the world. The company receives royalty payments through various operations that produce gold and diamonds. The company's principal holdings include a 38 percent stake in the Sadiola mine; a 40 percent stake in the Yatela mine; a 50 percent interest in Sadiola Exploration Limited; an 18.9 percent interest in Gold Fields Ghana Limited; an 18.9 percent interest in Abosso Goldfields Limited; a 100 percent interest in the Quimsacocha project; and a 75-80 percent interest in the Buckreef Project. The company earns a 1 percent royalty on income generated from its Diavik diamond property located in Canada's Northwest Territories. It also earns royalties from exploration properties in West Africa and South America.

International Minerals Corporation (CA: IMZ)

International Minerals Corp. explores for and develops gold and silver deposits in South America, primarily in Ecuador and Peru. The company's principal mineral properties include the Rio Blanco property (a gold-silver project in Ecuador), the Gaby gold deposit in southwestern Ecuador, and the Canicapa gold property located in the Loja Province of southern Ecuador.

Prior to 2008, GYGC was a development-stage business with no operations or revenues. The Company recorded expenses totaling $50,200, and a $50,200 net loss in 2007. On March 1, 2008, GYGC and Octagon Mining Corp. entered into a joint venture agreement in which the Company acquired a 50 percent working interest in certain mineral projects in Guyana. The terms of the joint venture require Octagon Mining to be responsible for the mining operations, and for GYGC to provide assistance in expanding the Port Kaituma operation. Per the agreement, the Company acquired its 50 percent working interest in exchange for one million shares of Company common stock valued at 50 cents per share.

In 2008, GYGC secured $500,000 in new funding for its mining projects in Guyana and received a new proposal from Octagon that expands the Company's land position and increases the scale of the Port Kaituma Project. New equipment has been purchased, which will increase project gold production from the current 100 ounces per month, to 250 ounces per month. Additionally, GYGC has plans to build a modern processing facility at Port Kaiituma that would further increase gold recovery rates. The joint venture has also submitted an application to acquire additional gold claims in the Barima-Waini region of Guyana which is geologically similar to the already producing Port Kaituma gold properties.

Based on current gold production averaging around 100 oz. per month, we expect the joint venture to produce 1,200 ounces. of gold in 2008. GYGC's share of the production will be approximately 600 ounces. At conservative $500/oz. gold prices, we estimate the Company's 2008 revenues in a $300,000 range.

We anticipate production will climb to at least 250 ounces per month in 2009. GYGC's share of this annual production will be approximately at 1,500 ounces. Assuming $600/oz. gold prices, we forecast the Company's 2009 revenues will fall in a $900,000 range. Thereafter, we expect the Company's revenues to grow at least 20 percent annually over the next five years as a result of production gains at Port Kaituma and successful exploration efforts at soon-to-be-acquired Barima-Waini gold claims.

GYGC's operating costs are modest, estimated to total only $490,000 this year. As a result, we expect the Company to turn profitable in 2009.

Valuation analysis

Exhibit 7: Peer valuation (Price as of June 23, 2008)

Source: Reuters

GYGC's peers were recently trading at forward Price/Sales multiples ranging between 6.7 times and 2.2 times revenues. We think GYGC should be valued at the higher end of the peer group range due to its established gold production and suggest a 5.0 times forward Price/Sales multiple is appropriate for these shares.

We derive a $1.50 price target for GYGC by multiplying our $0.9 million 2009 revenue estimate by a 5.0 times forward Price/Sales multiple, then dividing the resulting amount by 3.0 million fully diluted shares. We expect the share count to increase in 2008 and 2009 due to GYGC's reliance on equity private placements as a source of capital.

We believe GYGC is well-positioned for consistent double-digit revenue and earnings growth over the next several years as a result of steadily rising production from the Company's Port Kaituma joint venture project, soon-to-be closed gold claim acquisitions and a lean corporate overhead structure. As a result, we are initiating coverage of Guyana Gold Corp. with a Speculative Buy rating and a $1.50 price target. While we believe theCompany's Guyanese gold properties offer strong mineral potential, we caution prospective investors to consider the risk factors discussed below before investing. GYGC must overcome several obstacles, not the least of which is a need for substantial additional financing, to achieve its business goals.

Limited operating history

GYGC is still in an early development phase with very limited operating history; the Company has only recently begun generating revenues. Although GYGC expects to expand gold production from its Port Kaituma Project, there is no guarantee that production gains will be realized or that the Company's operations will be profitable.

Mining is a risky business with a long gestation period

Mineral exploration is a risky business and has a long gestation period. Very few explored properties become viable producing mines. Transitioning a property from exploration to production stage can require several years and millions of dollars in investment.

Competition for mining properties and other resources

GYGC must compete for property acquisitions and funding with other mining companies. Many of these competitors have more resources, better access to financing and established track records indicating successful exploration efforts.

Political and environmental factors

At present, the Guyanese government welcomes outside investment in its mining industry but this could change in the future. If the political and investment climate in Guyana changes, the Company's operating costs could rise, adversely impacting GYGC's future revenues and profitability.

Uncertainty regarding future gold prices

Gold prices have reached record levels in recent years and are expected to remain high for the foreseeable future. If gold prices decline significantly, however, GYGC may see the value of its mine production drop, resulting in lower revenues and reduced profits.

Gordon Nestor recently became the Company's lead geologist and manager of the Port Kaituma Project. He is a geological engineer by training with more than 10 years of field experience. He has held positions as geotechnician for the Guyana Geology and Mines Commission, research assistant for the Guyana National Science Research Council, technician at the Institute of Applied Science and Technology (IAST), research assistant for the Guyana National Science Research Council, and senior geologist for the Guyana Geology and Mines Commission.

He graduated in 1992 with a Master's of Science in geology from the Red Banner Geological Prospecting Institute in Moscow, Russia. He is also certified in geology from the Leningrad Polytechnical Institute in Russia. Nestor is also an expert linguist, speaking Guyanese, English, Russian, German, Spanish and French.