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Jan 19, 2009 - Participating Organization – Toronto Stock Exchange (TSX). Member – Canadian ... Toronto Dominion Centre. Canadian ... As a full-service investment bank, M Partners' first priority lies in the financial satisfaction of its clients.
MORNING NOTE

Morning Note

January 19, 2009

KINBAURI GOLD CORP. (KNB) EL VALLE DRILL RESULTS CONTINUE TO TURN UP GOLD; RESOURCE INCREASE WITH MORE TO COME ƒ

MARKET INFO Closing Price, January 16, 2009 12 Month Target Price Total Return Potential 52 Week Range

$0.345 $2.25 552% $24,458

Enterprise Value-FD (000's)

$24,458

Avg Volume (previous 3 months) FINANCIAL INFO (FYE May 31)

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08KV1175: 25.85m at 8.90g/t Au and 0.58% Cu, including 4.40m at 29.0g/t Au and 0.44% Cu, including 1.05m at 85.27g/t Au and 0.36% Cu

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08KV1173: 23.75m at 7.71g/t Au and 1.73% Cu, including 11.45m at 14.30g/t Au and 3.18% Cu, including 3.10m at 23.95g/t Au and 4.19% Cu.

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08KV1176: 26.6m at 6.83g/t Au and 0.45% Cu, including 2.25m at 16.60g/t Au and 1.38% Cu.

92,160 FY2008E

Shares o/s (000's)

48,753

Fully Diluted Shares(000's)

70,893

VALUATION

2008E

NAV/Share

$1.76

Resources (M+I) (000 oz)

1,234

Total Resources(M,I,I) (000 oz)

2,594

EV/Resource (M+I) ($/oz)

20

EV/Resource (Total) ($/oz)

9

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The latest results from Area 107 will be incorporated into the resource model to reclassify inferred resources as Measured and Indicated, providing increased resources for mine planning purposes.

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In addition to the drilling in Area 107, KNB released a number of holes from the San Martin Zone, an area which was initially discovered in KNB’s 2008 infill drill program. Although the results were not as impressive as early results from the zone, they did serve to extend the zone 150m to the southeast, increasing the potential for the zone to be continuous into or under the Monica Zone. Additional drilling is required to test this theory, however, if proven, this would be very positive for the El Valle project as it would not only increase resources but would likely improve the economics of developing the Monica zone.

Source: M Partners, Company Information

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This morning Kinbauri issued the latest drill results from its El Valle project in Northern Spain. The results continue to showcase the high grade mineralization located in Area 107 and the potential for resource additions with notable intersections including:

$0.16 to $1.11

Market Cap-FD (000's)

Rating: BUY Target: $2.25

As its drilling and studies progress, KNB is continuing to revisit its resource estimate to update it for both size and resource category. The latest work has focused on the El Valle Fault zone, which is contiguous with Area 107. Using previously excluded Rio Narcea drill results and improved geological understanding of the orebody, Ore Reserves Engineering has updated the resource in the El Valle Fault, increasing the resources substantially and improving the resource quality. The new total resource for this zone stands at 172Koz, an increase of 70%, and importantly, approximately 30% of the resource is now in the indicated category (formerly 100% inferred). The new resource estimate for the El Valle Fault is as follows: ƒ

Indicated Resources: 54,270 oz Au and 755Klbs Cu (195,300t at 8.6g/t Au and 0.2% Cu)

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Inferred Resources: 117,830 oz Au and 2.7Mlbs Cu (524,800t at 7.0g/t Au and 0.2% Cu)

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KNB is currently carrying out similar work for the East Breccia, High Angle 1, and High Angle 2 zones and is also carrying out resource calculation for Area 208, which has not been subject to a resource calculation previously. KNB anticipates a significant increase in project resources due to the above work.

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Management has advised that the scoping study being prepared by Scott Wilson Roscoe Postle has been delayed further and is expected to be received in February. Although we are disappointed by the further delays, the encouraging drill results and resources increases somewhat offset the delays.

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KNB continues to trade well below its peer group on an EV/oz basis ($9/oz vs. ~$60/oz) despite its extremely successful work program in 2008. We continue to believe that KNB is substantially undervalued given the existence of infrastructure, significant resource defined, and demonstrated exploration potential.

Member of the Investment Industry Regulatory Organization of Canada (IIROC) Participating Organization – Toronto Stock Exchange (TSX) Member – Canadian Investor Protection Fund (CIPF)

Tara Hassan 416.603.7381 ext. 228 [email protected]

M|PARTNERS Toronto Dominion Centre Canadian Pacific Tower 100 Wellington Street West Suite 2201, P.O. BOX 320 Toronto, Ontario M5K 1K2 Main line: 416-603-4343 Fax: 416–603-8608 Contact Information Research Tara Hassan Husein Kirefu Michael Krestell Lukasz Michalowski Alexander Pope

[email protected] [email protected] [email protected] [email protected] [email protected]

Trading Patrick Bellmore Jennifer Burke Rob Clark Trumbull Fisher Steve Isenberg Branden Keast Steve Sandusky Jeff Stevens Neil Whitaker

[email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

Advisory Warren Brown Christopher Dingle Josh Gerstein Kelly Klatik Thomas Kofman Jason Matheson Zeeshan Mukaddam

[email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

Who we are As a full-service investment bank, M Partners’ first priority lies in the financial satisfaction of its clients. In keeping with the firm’s self-imposed high standards, M Partners’ approach to investment is anything but standardized. Aiming to create new opportunities and ideas for clients rather than steering them towards typical investment outlets, M Partners has adopted a keen strategy of focused and relevant research. Such knowledge-driven efforts, coupled with the ample skills of the firm’s management, produces successful services ranging from account management to advisory engagements. M Partners received Investment Industry Regulatory Organization of Canada (IIROC) approval on April 14th 2005 and trades under broker number 97. The team currently has 19 members of varying degrees of financial experience, including principals Thomas Kofman and Steve Isenberg, who have a combined 35 years of financial experience and are well known in the field. This backbone of strong leadership will help chart the firm’s course into the future. In the coming months and years, M Partners will be focusing on a number of verticals, including environmental and infrastructure, real estate, mining, merchandising and consumer products, and other special situations. M Partners has strong financial backers who have extensive capital markets experience. The firm is a member of IIROC, a participating member of the Toronto Stock Exchange, The TSX Venture Exchange and the Canadian Investor Protection Fund (CIPF). Disclosure The particulars contained herein were obtained from sources which we believe to be reliable but are not guaranteed by us and may be incomplete. The opinions expressed are based upon our analysis and interpretation of these particulars and are not to be construed as a solicitation or offer to buy or sell the securities mentioned herein. In accordance with Policy 11 of IIROC, M Partners hereby confirms as of the date of this report:

Kinbauri Gold Corp. Does M Partners or its affiliates collectively beneficially own greater than 1% of any class of equity securities of the company which is the subject of the research report.

No

Does the analyst or any associate of the analyst responsible for the report or public comment hold shares in the company.

Yes

Has M Partners or a director or officer of M Partners or any analyst provided services to the company for remuneration other than normal investment advisory or trade execution services within the last 12 months, (may seek compensation for investment banking services from the company herein within the next 3 months).

Yes

Is any director, officer, employee or research analyst an officer, director or employee of the company, or serves in an advisory capacity to the company.

No

Has the analyst has viewed the material operations of the company. We define material operations as an issuer's corporate head office and its main production facility or a satellite facility that is representitive of the company's operations.

Yes

Dissemination All final research reports are disseminated to institutional clients of M Partners simultaneously in electronic form. Hard copies will be disseminated to any client that has requested to be on the distribution list of M Partners. All research reports are also posted on the website of M Partners Inc., at www.mpartners.ca. Reproduction of this report in whole or in part without permission is prohibited. Research Analysts The Research Analyst(s) who prepare this report certify that their respective report accurately reflects his/her personal opinion and that no part of his/her compensation was, is, or will be directly or indirectly related to the specific recommendations or views as to the securities or companies. M Partners compensates its research analysts from a variety of sources. Rating System Buy: price expected to rise Sell: price is inflated and expected to decrease Hold: properly priced Speculative Buy: price expected to rise; material risk to the investment exists Under review: not currently rated

Summary of Recommendations as of December 31, 2008 Buy

21

78%

Hold

0

0%

Sell

1

4%

Under Review

4

15%

Tender Total

1

4%

27

100%

M|PARTNERS Research • Trading • Advisory