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Worth a 3rd Look

Bob Moriarty
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Jul 26, 2011

In late 2008, junior mining companies were on sale. Over a hundred TSX-V companies were selling for less than the cash they had in the bank. Investors were panicking as blood ran in the street. Blood running in the streets is a great buy signal.

In late December of 2008, I wrote a short piece about a gold company in Mexico on the verge of going into production. The company was Timmins (TMM-V) and had a market cap of about $30 million. Company President Bruce Bragagnolo estimated they could be in production during the 2nd quarter of 2009 at a rate of 10,500 tpd producing about 84,000 ounces. He did point out that was a starting point. The shares were $.46. It was a great time to buy Timmins shares.

In early August of 2009 I did a follow up report after they announced production beginning in the middle of July. The market cap was now up to $65 million and they were anticipating pouring dore gold bars in late 2009. The shares were now up to $.63. They anticipated production of 80,000 ounces a year with a cash price of $412. Gold mines actually going into production is a great time to get in. Gold was $950 an ounce and who knows, maybe it too, would go up. Once again, investors had a chance to buy shares at a discount with relatively little risk.

It's now July of 2011, two years after they began loading the leach pad with 10,500 tpd. As Bruce predicted and I wrote, the 80,000-84,000 ounces turned out to be a bottom. They have expanded their crushing capacity to 18,000 tpd and are anticipating production of 100,000 ounces of gold per year. It's time to take a 3rd look at Timmins.

Timmins is adding an additional crusher this fall to take the company up to 25,000 tpd. That should add an additional 25,000 to 30,000 ounces of gold per year of production. Remember, as gold goes up $100 an ounce, when Timmins does 125,000 ounces of gold, they add $12.5 million to PROFIT.

In the last year, Timmins was drilling with limited resources. The gold reserve went from 611,000 ounces up to 780,000 ounces and all resources went up to 1.2 million ounces in all categories. Between July of 2010 and this last March, TMM drilled another 85,000 meters. They have not released the updated 43-101. Their resource will go up. They just announced some outstanding drill results coming from the 10 drill rigs turning.

Production of over 100,000 ounces of gold at $1600 would bring in over $160 million dollars in cash flow. At today's price of $2.58, the company has a market cap of about $354 million. The company is a natural takeover candidate for any major looking for a production story with a known resource. A takeover price would be in the $400-$700 range per ounce.

The company may be a better and safer place to get in than when I wrote about them the two times before. Pacific Road Capital bought 19.5% of the shares at an average price of $.90 and made it be known they wanted to sell. That created a big overhang. Timmins put together a group to buy those shares at $2.51. That transaction closed on July 21. That's a big plus.

In 1980 silver and gold prices topped in January. Even though they crashed from the incredible prices of $875 for gold and $50 for silver, the shares didn't move up with the metals in late 1979 and 1980. Even after the crash in prices of silver and gold, the share prices of the juniors soared to new highs in late 1980.

We just had a big crash in silver in May and a small correction in gold but the metals shares are priced cheaper relative to the price of the metals than they were in 2001 at the bottom. Once we get through the summer doldrums and fall stock market crash, I see a giant move higher in gold and silver shares.

I've indicated three different times that Timmins shares were cheap and headed higher. I've been right the first two times and I don't doubt I'll be right this time. Timmins has excellent management, is cashed up, is drilling to beat the band and will soon come out with an exciting and bigger 43-101 in my view. It's cheap.

Timmins has been a long time advertiser and we are biased. The company does a wonderful job of communication and is easy to reach. I encourage every potential investor to contact the company with any questions or concerns. You are responsible for your own investment decisions.

Timmins Gold Corp
TMM-V $2.58 (Jul 25, 2011)
TMGOF-PK 137.4 million shares
Timmins Gold website

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Bob Moriarty
President: 321gold
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