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Minco Strikes Gold

Bob Moriarty
Jan 24, 2011

Long time readers of 321gold will recognize the name "Minco Silver." I have written about or mentioned the company a number of times including as recently as early September five months ago. In September, Minco Silver was $3.45. It hit a high of $7.14 the first week of December and currently it's $5 and change.

Never confuse brains with a bull market. Everything has rocketed since August as silver shot from $19 to $31. Some of the companies I have covered over the last years such as Arian Silver, Endeavour Silver, Great Panther, Southern Arc, International Tower Hill, Gold Canyon, and others have all had new highs and many readers report 100% gains in the last few months. Live with it, it's a bull market and even the shares that lost 85% in 2008 have recovered.

Now I see a correction. I hope it's a bloody correction; I called it three weeks ago. The bloodier it gets, the more the metals will climb when they come out of the correction. When the fools in power announce QE 3, they may as well ring the bell for hyperinflation. So now I'm looking for the stalwarts who are going to climb regardless of a correction

Minco Gold has struck gold and announced a few days ago the purchase of a producing gold mine in Inner Mongolia. Minco Gold has a little secret. They own 13 million shares of Minco Silver. So when Minco Silver hit $7 a share, Minco Gold was worth $91 million just in liquid shares. And Minco Gold has $9 million in cash. At their 51% owned Changkeng Gold Deposit they reported a 1 million ounce 43-101 gold resource.

The gold deal is simple. Minco Gold is buying 51% of a producing gold mine with a 600 ton per day mill for $37 million dollars. They don't need to dilute at all to buy it. If they choose, they can sell Minco Silver shares. They may do a small placement, they may sell Minco Silver shares, they may do a gold loan, it doesn't matter how they finance. They only have 51 million shares fully diluted today; they will be in production shortly.

The press release was scant on numbers but it looks like the back of the envelope shows current production of something like 35,000 to 40,000 ounces a year. To be a serious producer, you need well in excess of 50,000 to 75,000 a year so I would be shocked if Minco Gold didn't try to increase capacity very soon.

Dr Ken Cai is in China working on the deal so I haven't talked to him and been filled in on the details but when I can talk to him I will and I want to go see it as soon as the deal closes. But for now, buying half of a producing mine is a very, very good deal. Gold is in a correction but this is going to be an interesting year.

Minco Silver is an advertiser. I would not be surprised if Minco Gold becomes an advertiser. They need to increase their visibility now they are in the gold production business. I have been associated with Minco for year, I go to their Christmas parties, and they are my friends.

I am biased as I can be. DO YOUR OWN DUE DILIGENCE. My readers have done well over the last year but it's a financial market and markets go up and down. It's your money, pay attention to it.

Minco Gold
MMM-T $2.08 (Jan 21, 2011)
MGH-Amex $2.10
48 million shares
Minco Gold website


Bob Moriarty
President: 321gold

321gold Ltd