Minco Forecloses Sterling
Every once in a while you run into a company that by all measure should be a slam-dunk. I wrote about Sterling Mining in July of 2003. Sterling had just taken over the world famous Sunshine Mine in the Silver Valley. Their stock was $.75. By taking over the Sunshine, they added 160 million ounces of silver.
It was a slam-dunk. The stock went from $.75 to $14 in 9 months. But there was this giant issue. Basically the company was being run as Ray Demotte's private sand box. And it took another 5.5 years for him to run the company from $14 to nothing while silver went from nothing to $22.
I had a hundred or so conversations with Demotte behind the scenes. I really wanted the company to succeed and move forward, he wanted to do as much damage to the company as possible. He succeeded, I failed.
I wrote about another pure silver play last March, I thought of it as a slam-dunk as well. At the time you could buy 4.5 ounces of silver for about $.87 an ounce by buying a single share of Minco Silver. I though that was cheap.
Well, now they have 157 million ounces in 43-101 silver with only 31.2 million shares outstanding. I'll work it out for you; you are buying 5 ounces of 43-101 silver today for $.25 an ounce per share at a share price of $1.25. Like most of the guys in the industry except for Bob Hoye, I misunderestimated the damage that the stock market crash would do to mining juniors.
If you think paying $.25 an ounce for silver is too high, it just got a lot better. Minco Silver made a loan of $5 million to Sterling Mining last July as part of a takeover bid. After some serious due diligence they made the decision to not move forward with the takeover bid in September. I was wondering what was going to happen because Sterling was still on the hook for the $5 million.
Now we have our answer. No one else wanted to take over the company so Minco has foreclosed on Sterling. For a total of about $6 million in a loan and expenses, Minco Silver is going to end up with a 10-year lease on the famous Sunshine mine with 231.5 million ounces of silver in resources.
This is going to get very interesting. The primary issue at the Sunshine was always management. There are a lot of other issues such as much of the silver being under water and an 8% NSR on a big portion of the mine due to the EPA. This isn't a management slam-dunk.
I was quite impressed with the Fuwan silver project when I visited it a year ago and I've always been impressed with management of Minco.
Chairman and CEO Ken Cai has taken on a giant project, that of restoring the Sunshine to health. He has the benefit of having a massive silver project in China well on the way to production so he has depth of real management but he needs to find someone who can move the Sunshine out of the swamp.
It's going to be an interesting situation. I'm going to plan on going up to Idaho sometime in the next few months to do a follow up article. I do not want to suggest for even a moment that Minco doesn't have a tiger by the tail. But the Sunshine was in production up until last fall. There are dozens of highly trained and motivated miners who want to see it in production at a profit and the US needs to produce something. After all, all real wealth is either mined or manufactured or grown. We have given away our manufacturing capability and our agriculture is at its maximum potential so if we are to ever come out of this depression, it's going to be through mining.
Minco Silver needs one of the best managers in the business to take over the Sunshine and restore it to financial sense. He has to be able to wrestle with alligators, kick ass with the finest and be able to understand economics and how to motivate people to produce their finest. The rewards for everyone will be enormous. If readers have any suggestions, contact me and I'll get in contact with Dr Cai. He wants the best and is prepared to make it very attractive for someone who can generate success.
The Sunshine Mine has as much potential as any silver project I know of in the world. It has issues that have to be sorted but that's why you pay people the big bucks. It can succeed and if Dr Cai can get everyone involved marching in the same direction, it will succeed.
It's getting more and more obvious every day we are in the worst financial crisis in history. We are in a depression created by a sea of debt. The debt must be wiped clean and we have to start all over with a clean slate. I believe the only solution is going back to honest money. You cannot have an honest financial system with dishonest money. That means a gold system and under a gold system, the metal you need the most is silver.
I know of no silver company in the world selling at such an attractive price. If Minco will put together the management team I believe they can, this will be a slam-dunk.
Minco Silver is an advertiser and we are biased. We have been given options in lieu of cash for advertising in the past so we do have a giant vested interest in seeing Minco Silver succeed. Do your own due diligence.