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Dear Members,
Silver is undeniably one of the most favoured investment
vehicles for the top minds in the industry. From its ability to rise
with a growing economy, to a precious metals hedge against inflation, silver is
a metal with many talents.
Over the past six months,
we have tracked the performance of many of the silver miners and explorers -
our favourite way to play the silver boom.
Many silver stocks have increased dramatically since the
beginning of this year. As a matter of fact, one company featured in our past Special
Report Edition increased almost 100% in just two short months. However, despite
a strong run, many silver stocks have recently experienced a strong sell off.
With the exception of one:
Minco Silver Corp (TSX: MSV) (OTCPK: MISVF)
Looking for the right company is
like finding a needle in a haystack or being a kid in a candy store. Whatever figure of speech you use, it's just plain difficult - especially in this market.
But if you are looking
for a pure silver play, no company makes more sense to us than Minco Silver Corp (TSX: MSV) (OTCPK: MISVF). We're not the only ones who think so.
The Largest Pure Silver Play in China?
Experts at both Raymond James and BMO Capital Markets have buy ratings for Minco Silver and both believe that the next few months may "potentially be a company-changer."
BMO just upgraded Minco Silver with a target price of $3.00, while Raymond James has a target price of $3.35, with a NAV (Net Asset Value) of $4.26/per share. Target prices from large institutions are often very conservative, factoring in every possible risk.
But as you will read later, these target prices could easily be raised if Minco Silver achieves a very important milestone - one both BMO and Raymond James expects to happen anytime now.
This milestone has the potential to make Minco Silver the largest pure silver play in China - an incredible feat when you consider China`s prowess in commodities.
More on this later.
The Fuwan Silver Project
Minco Silver (TSX: MSV) (OTCPK: MISVF) is a pure silver play with a 43-101 resource of 158 million ounces* in their Fuwan Silver Project in Guandong, China.
Fuwan is a world-class silver
deposit located on the Fuwan silver belt - a belt with a strike length of 10km. It has significant potential for expansion as it encompasses over 200 km2, of which less than 2% has been drilled to date.
The silver
zones of the Fuwan are shallow (250-450m deep), high grade, flat-lying, strata bound, with a total strike length of 2.8 km.
Contiguous with the Fuwan deposit, Minco Silver and its sister company Minco Gold have already delineated
several deposits within the district
totalling 180Moz of silver and 1Moz of gold.
Infrastructure
The location of the Fuwan silver project makes it very attractive and translates into very low capital requirements when compared to other mines of this size.
It is accessible
by paved highway and nearby waterway. Power,
water, fuel and supplies are also easily obtainable. The property can also accommodate everything required for a mine including tailings dam, waste disposal, and processing plant sites.
The majority of reserves and resources (~60%) are contained within two zones which will reduce
mine development requirements - saving money for Minco Silver and adding even more value to shareholders.
Take it to the Bank
Of the 158 million ounces that Minco Silver owns, 55 million ounces are reserves.
Unlike your standard indicated and inferred resource, reserves are resources that you can literally take to the bank and use as collateral for financing.
Minco Silver has already completed a "bankable feasibility" - this means their project is both profitable and makes sense (see Taking the Next Step for info on feasibility studies).
Based on the results of a Q4/09 feasibility study managed by
Wardrop Engineering, the Fuwan deposit is expected to produce an average
of
5.5Moz of silver at cash costs of US$5.65/oz over a 9.2-year mine life
based on
a 55.4Moz silver reserve. That means that Minco Silver is expected to produce close to $100 million in revenue and over $69 million net profit with current silver prices.
To give you an idea of what 5.5Moz could mean for Minco Silver, let's use Silvercorp Metals (TSX, NYSE: SVM), a primary silver producer in China, as a comparable. In 2009, Silvercorp pulled close to 4.2Moz of silver out of the ground and is forecasted to pull just over 4.6Moz in 2010. They have a current market cap of ~$1.15 billion. That's more than 10 times Minco Silver's current market cap of just over $110 million!
If production commences, Minco Silver will have annual revenues nearing its own current market cap. Don't forget that this forecast is based on only 55.5 million ounces, and not the total resource of 158 million Minco Silver has already found.
Bankable feasibilities take time and a lot of money. Not only has Minco Silver accomplished this, they have done this without major dilution and without incurring debt.
Moreover, they have $21 million dollars in the bank, and another $2.75 million in interest payments is expected to fill their treasury soon.
Minco Silver is already a great story when you consider it has a bankable feasibility study, no debt, $21 million dollars, and just over 50 million shares outstanding on a fully diluted basis.
But the real upside to this story lies in something that is expected to happen at anytime...
Timing is Crucial
Minco Silver (TSX: MSV) (OTCPK: MISVF) is on the brink of a very historical milestone - the same milestone
that helped propel Silvercorp's share price through the roof: the receipt of
their EIA (environmental impact
assessment) permit from the Chinese government.
To give you an idea of how big this is, take a look at the price performance chart for Silvercorp below:
click to enlarge  |
As you can see in the above chart, Silvercorp's share price slowly increased as they moved toward the EIA approval - very much like Minco Silver has to date. This is a very similar situation and is a sound reason why Minco Silver has gained in share value over the last few months, while other silver companies have dropped.
You can see how Silvercorp's share price continued to increase substantially following the receipt of their EIA approval - more than tripling in share price in a few short months and continually climbing in the subsequent years.
Once Minco Silver receives this permit, the Mining permit is simply a formality and should follow shortly - as was the case with Silvercorp, who received their mining permit a few short months after their EIA approval.
Minco Silver already has the following approved:
- Chinese exploration report
approved by MOLAR (Ministry of Land and
Resources)
- Chinese Feasibility
Study
- Project Approved by Gaoming county government
- Soil and Water
Conservation Plan
- MAP (Mining Area
Permit) approved by MOLAR
- Land use permit
In essence, the receipt of their EIA permit is more of an administrative
formality than anything.
But we know permitting processes are often intertwined with political and social roadblocks - especially in a country like China.
But that's where Minco Silver shines.
At the helm of Minco Silver is Dr. Ken Cai, a Chinese national who has been the driving force behind many
property negotiations in China.
Not only that, he has a wide range of
high-level contacts in the Chinese mining communities and this has
allowed Minco to access data on a large number of projects throughout
China.
Speaking from personal experience, Minco Silver's Dr. Ken has some serious connections in China. He not only has the right contacts in the Chinese government, but has structured Minco Silver in a way that will allow them to operate as a Chinese company - a very important step if you want to operate a large scale mine in China.
It takes some due diligence to understanding the intricacies of what Dr. Ken Cai has done. But we can assure you, from our personal experience with other public companies, that no other company has been able to do what Minco Silver has.
But don't just take our word for it, see what the large institutions have to say:
"We
believe Minco Silver offers a compelling buying opportunity given that critical
catalysts and milestones (final permitting, financing, etc) are merely months away..." - Raymond James, April 2010
"We
continue to expect the Environmental Impact Assessment to be approved,
which should be followed by receipt of a mining license, within the next
several months. We recommend investors accumulate Minco Silver shares
ahead of these key announcements." - Raymond James, April 2010
"Development
costs to construct a 3ktpd underground mine and flotation plant at Fuwan
of ~US$73M are low by international standards and represent a low barrier to initial
development." BMO Capital Markets, February 2010
"Given
the larger footprint of mineralization at Fuwan, BMO Research views the prospects
of both an increased mine life and future expansion through consolidation of the Fuwan
camp as realistic." BMO Capital Markets, February 2010
Both BMO and Raymond James are expecting Minco Silver to
receive their EIA permit anytime now. That's perhaps why Raymond James is calling 2010, Minco
Silver's "company-changing year."
One quick glance at Minco Silver Corp (TSX: MSV) (OTCPK: MISVF) and you can clearly see what it has over other companies:
- one of the
lowest shares outstanding compared to its peers with a tight capital structure
- $21
million in the bank with no debt
- 43-101 resources of over 150 million ounces, with 55 million ounce probable "reserves"
- Coverage and buy targets from large
financial institutions such as Raymond James and BMO Capital Markets
- A potential takeover target, as mentioned by BMO
- On the verge of a
historical milestone at any moment
With an estimated float of 11 million shares, Minco Silver (TSX: MSV) (OTCPK: MISVF) has done a great
job of attracting institutions but have yet to realise its retail capabilities. With such a small float, retail investors will be playing catch up with the institutions if Minco Silver receives their EIA permit.
Minco Silver is expecting to receive their EIA permit anytime now. When this happens, it will spell big rewards for the Company and its shareholders.
Minco Silver could be on its way to becoming one of the largest pure silver plays in China...
Minco Silver Corporation
Cdn Symbol: (TSX: MSV)
US Symbol: (OTCPK: MISVF)
Until next week,
Questions?
Call Us Toll Free: 1-888-EQUEDIA (378-3342)
*Minco Silver owns 100% of the Fuwan Silver Deposit, subject to a 10%
profit sharing agreement with the Guangdong Geological Exploration and
Development Cooperation.
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Minco Silver Summary
-
Objective to become a
mid tier silver producer with 5 to 10 million ounces of annual silver production -
Robust Silver projects with combined resources of approximately 250 million ounce resource - Probable "Reserve" calculations
-
Strong management
with global track record
- Strong Infrastructure
- Signifcant Potential to Increase Resource with 200km2 land package
- Strike Length of 10km
- Undervalued compared
to peers
- Institutional coverage from BMO and Raymond James
2010 "The Road Ahead" Strong Capital Structure-
Shares Issued: 42,055,636
- Fully Diluted: 51,525,872
- $21 Million Working Capital, Zero Debt
- Est. Float 11,000,000
- Approx. 74% held by institutions and funds: Minco Gold 30.9%, IDG Accel et al 18.5%, Canadian Institutions 11.8%, US Institutions 12.45%
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The Fuwan Silver Project
The Fuwan Silver Project is Located in Guangdong Province, 45 km southwest
of Guangzhou, China's 4th largest city.
Foshan Minco is the
operating company for the Fuwan Silver Project and holds 100% of the exploration permits.
Ownership of Foshan Minco
- 90% Minco Silver
- 10% Guangdong Geological Exploration & Development Corporation ("GGEDC")
Large Land Package- Over 200 km2 with only a small portion explored to date
Fuwan Silver Deposit -
Silver zones are shallow (250-450m deep), high grade,
flat-lying, and strata bound -
Hosted within
Carboniferous limestone unconformity overlain by Triassic sandstone -
Eight silver
zones controlled by a NE trending syncline Total strike length is 2,800 metres, deposit remains open
along strike to the southwest and down dip to the southeast
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Reserves and
Resources NI 43-101
Probable Reserves
 | Resources and Reserves Layout  | Red = Probable Reserves Silver = Indicated
& Inferred
click to enlarge  |
·*NI 43-101 compliant, Wardrop (October 2009) Reserve
based on: Silver 13.00 US$/oz; Gold 688 US$/oz; Lead 0.88US$/lb; Zinc 1.28US$/lb; Operating cost of $37.13/t with Silver cut
off grade of 119 g/t
·**NI 43-101 compliant,
P&E Engineering ( May 2008) 40 g/t cut off
·*** Probable
reserves were subtracted from the Indicated resources at the Fuwan Permit
· **** Resources
reported on the Changkeng
permit represents 51% of the actual resource s and reflects Minco's actual ownership. |
Fuwan Feasibility Highlights
-
Feasibility completed
by Wardrop, NERIN and ERM to International standards -
Underground
mechanized mine at 3000 tpd (990,000 t/a) at an average grade of 189 g/t. -
Combination of cut
and fill, drift and fill, room and pillar. -
Milling will be on
site producing 2 concentrates: Ag/Pb and Ag/Zn -
Conventional
differential flotation system, silver recovery ~91%. -
Economics based on a
3 year historical average metal prices from the LME as at April 29, 2009. Low Capex compared to similar
projects
click to enlarge
 | |
Fuwan Silver Project
Infrastructure
Excellent Infrastructure- Accessible
by paved highway and nearby waterway
- Power,
water, fuel and supplies easily obtainable
-
Property accommodates tailings, waste disposal, & processing
plant sites -
General labour readily accessible -
Supporting industries in close
proximity
Paved Highway Near Fuwan
 | Eastern View from Fuwan Deposit
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Significant Potential to Increase Resources
Regional Exploration and Potential
-
3
permits covering 205 sq. km -
Over
50,000 individual soil samples collected -
Strong
gold-silver anomalies -
Geophysics
program completed Excellent
potential to upgrade current indicated and inferred resources
Fuwan Silver Belt has a 10 km strike length  |
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Permitting Process
Approved
- Chinese exploration report
approved by MOLAR (Ministry of Land and
Resources)
- Chinese Feasibility
Study
- Project Approved by Gaoming county government
- Soil and Water
Conservation Plan
- MAP (Mining Area
Permit) approved by MOLAR
- Land use permit
Completed
and Awaiting Approval
In Progress
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Senior Management Team
Dr. Ken Z. Cai, Chairman & CEO
 Dr. Cai is the current Chairman and Chief Executive Officer Minco Silver
Corporation. Dr. Cai holds a Ph.D. in mineral economics from Queens
University in Kingston, Ontario, Canada and has 24 years of experience
in mineral exploration, project evaluation, corporate financing and
company management. Dr. Cai has served as a director of several
publicly-traded and private Canadian and Chinese companies. He also
serves as the President & CEO of Minco Gold Corporation.
Dwayne L.
Melrose, Vice President, Exploration
 Mr. Melrose serves as VP Exploration for Minco Silver Corporation. Mr.
Melrose, a graduate from the University of Waterloo in Ontario has over
30 years experience as an exploration and mine geologist. He has been
involved in all aspects of exploration from grass roots to mine
definition/feasibility stage and open pit mine geology. Mr. Melrose has
worked globally with Cameco/Centerra's Gold companies' exploration
departments for over two decades in Canada, the USA, and Kazakhstan. He
most recently served as Exploration Manager at the Kumtor Gold Mine in
the Kyrgyz Republic where he was directly responsible for the discovery
of the high grade SB Zone and significantly increasing the overall
reserves and resources of the Kumtor Mine and extending its mine life.
Mr. Melrose joined Minco Silver in 2007, and has been responsible for
the overall exploration program since joining the company, increasing to
and defining 157 million ounces of silver, advancing the Fuwan project
thru the initial Preliminary Economic assessment stage through to
complete of a successful and positive Feasibility Study. Mr. Melrose
also serves as VP Exploration for Minco Gold Corporation, and has added 1
million ounces to the resources (all categories) of the Changkeng gold
property by December 31, 2008.
Paul Zhang, VP Finance/CFO
 Mr. Zhang is a member of the Institute of Chartered Accountants of
Ontario, the Institute of Chartered Accountants of British Columbia and
is a Certified Public Accountant in the United States. From May 2006 to
March 2008, Mr. Zhang was the Chief Financial Officer of Migao
Corporation (TSX:MGO). From November 2005, Mr. Zhang was the Chief
Financial Officer of the operating subsidiary of Migao Corporation. In
addition, from March 2003 until November 2005, Mr. Zhang was the
Managing Partner of Zhang & Du, LLP Chartered Accountants. From
November 1, 2001 to March 2003, Mr. Zhang was the Controller and Manager
of Accounting of Retirement Residences Real Estate Investment Trust,
which was a TSX-listed entity.
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Forward-Looking Statements
Except for the
statements of historical fact, the information contained herein is of a
forward-looking nature. Such forward-looking information involves known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievement of the Company to be materially different
from any future results, performance or achievements expressed or implied by
statements containing forward-looking information.
Although the Company
has attempted to identify important factors that could cause actual results to
differ materially, there may be other factors that cause results not to be as
anticipated, estimated or intended. There can be no assurance that statements
containing forward looking information will prove to be accurate as actual
results and future events could differ materially from those anticipated in
such statements. Accordingly, readers should not place undue reliance on
statements containing forward looking information. Readers should review
the risk factors set out in the Company's prospectus and the documents
incorporated by reference.
Cautionary Note to
U.S. Investors Concerning Estimates of Inferred Resources
This presentation
uses the term "Inferred Resources". U.S. investors are advised that while this
term is recognized and required by Canadian regulations, the Securities and
Exchange Commission does not recognize it. "Inferred Resources" have a great
amount of uncertainty as to their existence, and great uncertainty as to their
economic and legal feasibility. It cannot be assumed that all or any part of an
Inferred Resource will ever be upgraded to a higher category. Under Canadian
rules, estimates of "Inferred Resources" may not form the basis of feasibility
or other economic studies. U.S. investors are also cautioned not to assume that
all or any part of an "Inferred Mineral Resource" exists, or is economically or
legally mineable.
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Disclaimer and Disclosure
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Statements included in this newsletter may contain forward looking
statements, including the Company's intentions, forecasts, plans or
other matters that haven't yet occurred. Such statements involve a
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