Linux Gold Corp. (OTC BB:LNXGF)

EXPLORING FOR GOLD AND SILVER IN ALASKA, BRITISH COLUMBIA AND CHINA - MAJOR DRILL PROGRAM TO START THIS SUMMER AT GRANITE MOUNTAIN, ALASKA

Business Summary

Linux Gold Corp. is a mineral resource company with a mandate to develop mineral prospects that have potential to become large producing mines. The Company now has interests in several properties with this potential, including:

1. GRANITE MOUNTAIN, ALASKA Early 2005 the company acquired100% rights to explore for mineral reserves on this intriguing 37 square mile property. There was a fair amount of work completed during the 1960's that says Granite Mountain has a good chance of economical merit. Linux started the first stage of exploration in fall 2005 and will look to complete core drilling programs over the next couple years. The area is located beside North America's largest gold reserve and is 180 miles south of the largest zinc mine.
2. BO LUO NUO, CHINA. A sizable landmass covering 161 square kilometers approximately 4 hours north of Beijing. The property has mined small amounts of gold and silver by bucket and hand for many years. Existing are 10 gold zones, a mill, and vast array of adits (tunnels). The mission is to bring the existing mill into production in a timely manner and extensively analyze the property to locate an economically feasible deposit of gold, silver and platinum. Linux will look to upgrade the property and facilities to modern day standards that would enable significant mineral production.
3. TY & ORO, BRITISH COLUMBIA, CANADA. In the second quarter 2003, the company acquired 100% interests in two gold prospects located in the Lillooet Mining Division, B.C., Canada. The properties are located 6 miles from the Bralorne-Pioneer Gold Mine, among one of the richest gold mines in Western Canada, which since its discovery has produced 4.1 million ounces of gold.
4. FISH CREEK, ALASKA. Linux Gold owns a 50% joint venture interest (Optioned to Teryl Resources Corp. 50%) in 30 mining claims known located in the prolific Fairbanks Mining Division in Alaska. Kinross Gold's Fort Knox mill is within 6 miles from the claims and has been in operation for several years, producing over 400,000 ounces of gold annually at a cash cost of US$207 per ounce. There could be potential to build a low-cost, gold placer mining operation.

Alaska Granite Mountain Project

According to Linux's geologist, the Companies flagship property Granite Mountain has 4 areas with the potential for significant discovery of world-class deposits. The program will include: a scout drilling program by placing four diamond-core drill holes on the mineral areas located in 2005.

• The Gossan Ridge sub-volcanic gold-silver-copper prospect.
• The Saddle "cordilleran-vein" lead-zinc-silver prospect.
• The Quartz Creek plutonic gold-copper-bismuth prospect.
• The Peace River plutonic molybdenum-copper-gold-uranium prospect.
• An additional hole will be placed to drill into the cupola of the Quartz Creek pluton to investigate the volcanic thermal contact zone overlying the intrusive.

The Company, and its consultants, are very encouraged by the results of the 2005 geologic reconnaissance program and believe that the Kiwalik and Peace claims are highly prospective to host several large to very large porphyry and porphyry-related precious metal and base metal ore deposits.

Fish Creek Property - ALASKA

The Fish Creek Claims are located in the Fairbanks Recording District, Fourth Judicial District, North Star Borough, Alaska.

The Issuer's 50% interest in the Fish Creek Claims was acquired pursuant to a Mining Lease made September 7, 1990 between the Issuer and Stephen L. Birdsall. By way of an amending agreement dated October 3, 1991, a total of US$60,000 consideration was paid to Stephen L. Birdsall to acquire a 100% interest in and to the Fish Creek Claims and the Fish Creek Claims have been registered jointly in the name of Keltic Enterprises, Inc. and JGR Petroleum, Inc. in trust for Linux Gold Corp. Teryl Resources Corp. completed an option agreement with Linux for a 50% interest in the Fish Creek Claims after expending US$500,000 on the property and issuing 200,000 shares of Teryl. Linux has the right to back in for a 25% working interest or retain a 5% net royalty interest.

Location and Access

The Fish Creek Claims are situated 20 air miles northeast of Fairbanks, Alaska and are accessible by road north along the Steese Highway to the Fairbanks Creek Road and thereafter on the Fish Creek gravel road. From the end of the road it is a one mile walk to the western boundary of the Fish Creek Claims. By the end of 1993 a road extension constructed by Amax Gold Inc. ("Amax") through the 26.7 mile turn-off point to the Polar Mining operation extended to within 100 yards of the southwestern claim boundary. Swampy conditions prelude vehicular passage over the claim area. The Fish Creek Claims are adjacent to the Gil Joint Venture Claims with Kinross Gold ("Kinross") and Teryl and is six miles from the Kinross Fort Knox Mine, now producing over 1,000 ounces of gold per day.

TY Gold Property - CANADA

Linux has a 100% interest in 21 units in the Bralorne/Lillooet mining division in British Columbia called the TY Gold Property. The TY Gold Property is adjacent to the company's ORO Property and is located 12 miles from the Bralorne Pioneer Gold Mine, which since its discovery, has produced 4.1 million ounces of gold worth some $1.5 billion at today's gold prices. Linux Gold Corp. now has a total of 41 units in the Bralorne area.

Previous drilling completed on the TY Gold Property on the Beta zone encountered values up to 5 feet of 5.86 oz/ton silver and 1.129 oz ton gold. Additional drilling has been recommended by Sampson Engineering Inc. to further explore the Beta zone.

The TY Gold Property was acquired for $30,000 (payable over three years) and 150,000 shares of Linux Gold Corp. The property is subject to a 2% net smelter interest (NSR). The company has an option to purchase each 1% NSR for $1,000,000 prior to production.

ORO Property - CANADA

Linux has a 100% interest in 20 mineral claim units called the ORO property in the Bralorne/Lillooet mining division, British Columbia. The ORO property is located 12 miles from the Bralorne Pioneer Gold Mine, which was one of the richest producing gold mines in Western Canada. Several EM-VLF conductive zones have been located on the ORO property. The magnetic survey shows the entire property is underlain with sediments and volcanics, which are important geologic structures for the placement of gold bearing quartz veins.

The ORO property was acquired for $10,000 and 100,000 shares of the company and is subject to a 2% net smelter return. Linux Gold has the option to purchase back each 1% NSR return for $1,000,000 prior to production.

BO LUO NUO, CHINA

A sizable landmass covering 161 square kilometers approximately 4 hours north of Beijing. The property has mined small amounts of gold and silver by bucket and hand for many years. Existing are 10 gold zones, a mill, and vast array of adits (tunnels).

The mission is to bring the existing mill into production in a timely manner and extensively analyze the property to locate an economically feasible deposit of gold, silver and platinum. Linux will look to upgrade the property and facilities to modern day standards that would enable significant mineral production.

Yanshan orogenic granite in Bo Luo Nuo district. (It is inferred that formation of the gold deposits had something to do with the intrusive and its contact belt with metamorphic rock.) An intrusive is where volcanoes have pushed rock and minerals to the surface usually millions of years ago.

Recent News: LINUX GOLD COMPLETES US$2,000,000 SECURED CONVERTIBLE DISCOUNT NOTES FINANCING

Linux Gold Corp. announced the completion on May 8 of a private placement of US$2,000,000 of securities with several institutional investors.

The private placement consists of Secured Convertible Discount Notes which were issued at an original issue discount of 5%, are convertible into common stock of the Company at a conversion price of $0.40 per share and mature on November 8, 2007. US$1,500,000 was funded at closing with the remaining US$500,000 to be funded upon the filing of a resale registration statement with the US Securities and Exchange Commission. The investors will also receive five-year warrants to purchase, in the aggregate, 5,000,000 shares of common stock of the Company at a conversion price of $0.50 per share and warrants to purchase, in the aggregate, an additional 2,500,000 shares of common stock of the Company at a conversion price of $0.52 per share exercisable upon the earlier of one year after the effectiveness of the resale registration statement or May 8, 2016. The Company will receive an aggregate of $ 1,825,000 of net proceeds from this transaction. Casimir Capital L. P. acted as placement agent for the financing.

The funds raised will be used for continued exploration and development expenses on the Granite Mountain claims, general working capital purposes.

Fundamental Considerations

Early 2005 the company acquired100% rights to explore for mineral reserves on this intriguing 37 square mile property GRANITE MOUNTAIN, ALASKA. There was a fair amount of work completed during the 1960's that says Granite Mountain has a good chance of economical merit. Linux did the first stage of exploration in the fall 2005 and will look to complete core drilling programs over the next couple years.

The area is located beside North America's largest gold reserve and is 180 miles south of the largest zinc mine.

The new Granite Mountain project has a 2 mile mineralized zone with favorable discovery potential. The land mass is 37 square miles in a proven area of exploration success.

Back in 2002, when the bull market in gold was in its infancy, Linux traded at less than 5 cents. I few things have change since that time and with gold trading at $ 700, financing is no longer a problem.

The market has got excited about the recently acquired Granite Mountain project, and with the financing in place, an aggressive drill program can go under way. Investors obviously have started betting that there is a major deposit to be discovered.

It is not surprising therefore that the share price has reached a new high in recent days.

But Linux is still an early stage speculation, for which reason the shares should only be bought by those who are keen on such high risk investments.

Technical Considerations

The inflation adjusted peak of the gold price in 1980 was $ 2,200 and in a bull-market, previous peaks are usually exceeded by a large margin. We do not therefore expect any prolonged corrections at this stage even though the swings may become more pronounced.

GRANITE MOUNTAIN on Alaska's Seward Peninsula is where Teck Cominco, NovaGold and Northern Dynasty have attained success in locating significant reserves of gold, copper and zinc. NovaGold has properties on both sides of Granite Mountain and has located approximately 25 million ounces of gold and significant reserves of silver and copper throughout Alaska.

To the south, Northern Dynasty owns the rights to purchase the world class Pebble gold-copper-molybdenum porphyry deposit where they have an inferred mineral resource of approximately 28 million ounces gold and 16.4 billion pounds of copper.

The world's largest zinc deposit owned by Teck Cominco is approximately 180 miles to the north with over US$20 billion worth of zinc reserves in which they are producing 500,000 tons of ore annually.

Positive drill results from drill program which Linux is undertaking could deliver the spark for a much higher share price.

Peter Zihlmann


www.pzim.com
[email protected]