The Silver Summit Summary
Unfortunately I was unable to watch most of the speaker presentations at the Silver Summit this past week in Coeur d’Alene, Idaho because I was too?busy talking to companies and industry people about all manner of subjects,?one of which?is the sad state of affairs facing Sterling Mining and the Sunshine Mine, the jewel of American silver mines. More on the Sunshine Mine later, but for now here are some observations about the tidbits of the Silver Summit that I was able to observe.
Attendance from last year’s Silver Summit was down about 10% but the people who did attend were generally enthusiastic and optimistic. Each year there are fewer and fewer “looky-loos” and more mining professionals and large investors at this conference.
Many of the most significant silver explorers and producers were represented with a larger-than-normal contingent of company CEOs and Presidents. I had a chance to talk one-on-one with quite a few of them (although not enough).
I “rediscovered’ Minera Andes as a silver stock. They hold 49% interest in the San Jose high grade silver-gold project in Santa Cruz province Argentina where Hochschild Mining is the operator and owns the other 51%. The plan is to?double the current 750tpd production rate by next year which would result in 3 million ounces of attributable silver and 60,000 ounces of attributable gold production per year with cash flows of $50 million per year at current metal prices. This is made possible because the ore grade at San Jose is 20 ounces per ton silver and 7 grams per tonne gold. In addition, the plan is to produce silver-gold dore bars on site representing 100% of production. In other words, the operation is robust and would likely remain economic at significantly lower metal prices.
The company also has the Los Azules copper project in Argentina which hosts an inferred resource of over 10 billion pounds of copper at a 0.35% cut-off. Xstrata has a back-in right to 51% of the project and frankly the market is giving?the project?zero value despite the fact that similar projects have recently changed hands (Global Copper, Northern Peru Copper) at amounts that would indicate Minera Andes is currently fairly valued (at around C$200 million market cap) solely on the basis of its Los Azules copper project without giving?effect to San Jose. I sincerely believe the copper project should be spun off in this market.
Minera Andes reminds me a lot of Exeter, one of my favorite silver-gold exploration plays, which also has a high grade silver-gold project in Santa Cruz province (Cerro Moro) as well as a gold-copper project in Chile (Caspiche). I’m thinking about lightening up on Exeter at some point and moving some funds into Minera Andes as the latter company offers greater defense should the market for mining equities remain challenging for a while. The two stocks have similar charts when viewed over the long term but recently Minera Andes has been outperforming Exeter. Thus, I’d like to see Exeter recover somewhat before moving over some funds.
I’d also like to perform some more analyses on Minera Andes before declaring it a “winner”. One of these analyses will be the Mining Share Value Strategy as devised by Don Hansen. Stay tuned.
The most original and relevant comment from the speakers that I did catch was Greg McCoach of the Mining Speculator?stating during a round table discussion?that tax loss selling near the end of November could create another washout in junior exploration shares.
I’ll possibly have more later as?I go through my notes and search my noggin.
Well I sure would love to hear what’s going on at Sterling if you have any insight, Tom. I consider myself a competent investor, but that collapse has me skeptical about the entire industry. How do production estimates miss that much unless they were fraudulant to begin with? How can the mine plan be that dispaced from reality? Was their whole plan to be able to equity finance when the sh*t hit the fan? So much for that. Very curious to see if they can hold onto the mine.
Steve: We will be able to explore these types of questions in The Metal Augmentor service. One of my personal goals is to bring industry insider level information to the retail investor. In the case of Sterling, not even many industry insiders know/knew what is real and what is not. The mining business is one where investor “due diligence” is virtually never performed properly, not even by most brokerage analysts.
McCoach was on BNN 9/10 telling people to not buy mining shares. He and the Aden sisters telling people to sell gold (also on 9/10) were the perfect contrarian indicators to load up on 9/11.
silverax,
i spent a fair amount of time this past summer looking at minera andes San Jose silver/gold project among other things. I could send you my excel cash flow worksheet if you would like. I also put together a summary of form 3 and 4’s for Minera Andes if you would like to check these out.
Hello flexon, I would appreciate you sending me your workup! It would probably save us quite some time on the front end of setting up the analysis. You can find my e-mail on the “contact” page.