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When 2+2=5

Bob Moriarty
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Mar 18, 2013

In the math we learned in elementary school our teachers taught us that two plus two equals four. Later, some of us may have learned of synergy, the concept that the whole can be greater than the sum of its parts.

I visited an interesting company in Mexico recently that is a perfect example of synergy and that indeed 2+2 can equal 5. The company is named Soltoro (SOL-V) and has its main silver project in Jalisco State.

Soltoro picked up 100% of the El Rayo project in 2005 and has drilled 51,000 meters since defining a 77 million ounce silver resource in the M&I category at just short of two ounces per tonne. With about 60 million shares outstanding at a price of $.37 per share you have 77 million ounces for $22 million or $.35 an ounce. Ten years ago with $5 silver, silver companies were selling for $1 an ounce. Maybe no one will ever want silver again especially hearing the news from Cyprus about how much safer your money is in a bank than in boring old silver bars.

Part of that M&I resource is found in the La Soledad property with some 13 million ounces of silver measuring 104 g/t or about 3.3 ounces of silver to the tonne. Me? I’d go mine Soledad and pray that someone might want precious metals some day.

But there are other parts to the equation. Soltoro has two projects they call Coyote and Victoria that they have optioned to Argentum Silver Corp for shares and some minor property payments. Soltoro retains a 3% NSR on the projects. I’m not super impressed with the management of Argentum so I don’t count on this adding much to the equation.

On the other hand, as economists are wont to say, Soltoro has a deal with Gold Reserve on the 49 square km La Tortuga prospect where Gold Reserve can pick up 51% of the IOCG project for $650,000 in property payments to Soltoro and spending $3 million over a three-year period. As the Spanish say, that’s an “El Goodo Dealo.”

Gold Reserve had a giant gold project in Venezuela at KM 88 named Brisas with some 11 million ounces of gold and 1.4 billion pounds of copper. They spend almost $300 million over a sixteen-year period advancing the project to construction. They had already ordered the equipment for the plant and were ready to build. In April of 2008 the Chavez government in Venezuela expropriated the project. Currently the dispute is in arbitration.

This gets real interesting here. Gold Reserve had issued over $100 million in convertible bonds. When Chavez stole the project they were sitting on a boatload of cash, an even bigger boatload of obligations and no gold. They needed a good project.

Gold Reserve did sort out the convertible debt issue for now and is sitting on a cash kitty of about $10 million. Finding and developing a good project isn’t an option as it is with most junior mining companies’ management looking to live the good life at the expense of shareholders, Gold Reserve has to produce the goods or go away.

If you understand the background and current status of Gold Reserve, it really means they spent a lot of time looking at projects and concluded that the La Tortuga project was the real deal. I expect them to move forward quickly, they literally have a gun to their head.

But the real secret to Soltoro is totally subjective. You literally have to visit the project and sit down with management for a good period of time to get it. The secret weapon of Soltoro is Andrew Thompson, the President and a Director. In my view.

I’ve been to hundreds of visits to mining companies over the last dozen years and heard all the bullshit stories about how they were going to succeed. Few of them have. Most juniors collect projects like Beanie Babies. They collect them in the hope that some other fool might buy them off them. Andrew Thompson is actually a business man first and a mining guy second. He has invested a lot of his own money into deals and made a profit. Most mining management consists of a bunch of bloodsuckers leaching off the money of innocent investors. Thompson is the real deal.

He is advancing projects. Actually I’m baffled as to why they haven’t made a production decision at El Rayo, they have an easy and rich starter pit at La Soledad. If you can’t make money with a 77 million ounce silver deposit, you should be doing something else. The project has been drilled out; 98% of the resource is in M&I. But Andrew is a wheeler-dealer and I think shareholders will be surprised with what he comes up with.

The Argentum silver deal is a wash; Soltoro has a bunch of shares in a near worthless company. The Gold Reserve deal is a major plus and I think it will be the major thrust of the company in a year or so. But the synergy is in having a real businessman who understands profit and loss running the company.

That’s not to say that I agree with 100% of what they are doing. While I was on the project, they kept talking about putting investor money into the ground and there was the inferred (but we don’t want to put money into telling our story.)

With 2300 juniors in Canada, competition for investor money is stiff. It’s axiomatic that an investor can’t buy your stock if they don’t know your name. I keep running into companies that seriously believe that putting out a press release now and again will have investors standing in line to buy their shares.

I think it was Ralph Waldo Emerson who was misquoted as saying, “Build a better mousetrap and the world will beat a path to your door.” I’d wager that his next-door neighbor who promoted his mousetrap made a lot more sales.

The Soltoro story is excellent. As a silver investment, they have some of the cheapest silver I know of and it’s ready to produce. I expect Andrew Thompson to have something up his sleeve and the company will move forward.

All resource shares are on sale right now. That won’t last forever. Soltoro is cheap on a per ounce basis and cheap on a blue-sky basis. Management is excellent. I don’t own shares but if I were a silver nut I’d be a buyer. Do your own due diligence.

Soltoro Ltd
SOL-V $.37 (Mar 15, 2013)
SLTOF-PK 59.7 million shares
Soltoro website

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Bob Moriarty
President: 321gold
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