In Today's Issue

? CHESAPEAKE GOLD CORP.

Mackie Research Capital - Morning Comments

CHESAPEAKE GOLD CORP. - (CKG - CAD$15.49)
Target Price: CAD$42.00      Recommendation: BUY

Metallurgy Proves Successful!

CKG released its metallurgical results from its test bulk-sulphide concentrate from its flagship gold-silver-zinc Metates project in Mexico. The testing confirmed the following average recoveries: 90% for gold (ranging from 85-94%); 77% for silver (ranging from 71-84%) and 81% for zinc (ranging from 77-86%). These results are inline with our expectations of 85% overall recoveries for gold, silver and zinc.

These results as significantly de-risking the Metates project as it shows: (1) a mix of both mineralization types (intrusive and sedimentary) found at Metates grading on average 0.7 g/t gold, 24.6 g/t silver and 0.25% zinc is able to be floated into a bulk-sulphide concentrate at a relatively coarse grind of 80-100 microns to achieve recoveries of 95% gold, 83% silver and 88% zinc; (2) 99% sulphide oxidization can be achieved in the autoclave/POX unit ; and , (3) cyanidation can achieve recoveries of 95% for gold, 87% for silver and 85% for zinc, given a relatively low grade bulk-sulphide concentrate grading 3.2 g/t gold, 112 g/t silver and 1.17% zinc.

Inputting the new recoveries into our model increases our target price for CKG to $42.00 (from $39.00) based on 0.5x our NAVPS of $83.87 (was $77.96).

By Barry Allan - 2011/09/21

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