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Shenanigans in the Silver Valley

Bob Moriarty
Sep 9, 2009

For anyone bored with fake "Reality Shows" or turned off by "Soaps" with a lack of plot you might want to consider following the antics of those involved with what I will title "Shenanigans in the Silver Valley."

Our saga of the shenanigans begins with the assumption of a 15-year lease on the Sunshine Mine by Ray Demotte of Sterling Mining some six years ago. The lease called for payments of $10,000 a month to SPMI and provided for a $3 million to $5 million buyout depending on the price of silver.

In hindsight, everyone pretty much admits Demotte was a lightweight. We gave him a lot of support in the beginning but when he began fibbing to me on a regular basis, I dropped him like a hot rock. It was clear to me and I said so, he was going to end up destroying Sterling. And he did.

He appointed all of the rest of the board of directors. His only requirement was that no one challenge Ray Demotte. Sterling was a one-man band and the Board of Directors wielded a rubber stamp.

That's important because of the few people who don't get it and praise Demotte while critizing the Board. It was his board, he handpicked everyone.

With the financial crisis that hit a boiling point, Sterling began to fall apart. First of all they stopped mining in late 2007, finally the board fired Demotte and after squandering tens of millions of dollars, the company finally went into bankruptcy on March 3rd of 2009. That's about the time the Shenanigans really started.

As an aside, one of the major players, you can read his comments as "SilverToday" on Stockhouse, is David Greenway, President and CEO of SNS Silver. I'm not sure it's legal for an officer of a publicly traded company to post on a chat board under a pseudonym but that doesn't stop David Greenway.

David Greenway, and John Ryan, directors of SNS Silver, got themselves appointed to the Board of Directors of Sterling in January. John Ryan was President and CEO of Sterling. On February 18th of this year Minco Silver, as a creditor, foreclosed on Sterling Mines and obtained a Temporary Restraining Order in order to prevent Sterling from selling or disposing of any real assets of Sterling. Ryan resigned from SNS Silver the same day in order to focus on the affairs of Sterling. David Greenway resigned from Sterling.

Not to be dismayed by a little TRO, on February 19th, Ryan convinced the Board of Sterling to abandon the 15-year lease with SPMI on the Sunshine Mine and mill. John Ryan resigns from the Sterling board on the 26th after dumping the only real asset Sterling owned. They didn't want the appearance of any conflict of interest, after all.

SNS Silver promptly signed a deal with SPMI that provided for a $250,000 non-refundable deposit, a payment of an additional $960,000 for the lease for the 1st year and $1.2 million a year after that. With the stroke of a pen, Robert Mori as owner of SPMI increased his revenue 10-fold for the lease.

There was this slight problem of the TRO and the fact that Sterling was now in Bankruptcy. They didn't have any legal right to abandon the lease. And there was, after all, the slight ethical issue of abandoning a lease as worthless and immediately paying $1.2 million a year for it.

After many interesting days of legal wrangling largely resembling the feeding trough at a family BBQ put on by the Donner Party, the Bankruptcy Court determined the lease had not been legally abandoned and in fact still belonged to Sterling. After still more legal wrangling, SNS Silver turned care and maintenance of the Sunshine over to SPMI and then the Court had to order SPMI to return the Sunshine to Sterling, the rightful owner of the lease.

Robert Mori has been howling at the moon for six months that he hasn't granted permission for transfer of the lease, casually ignoring the fact that no one has asked for the lease to be transferred. And that only SNS Silver could possibly offer jobs to everyone within 500 miles of the Sunshine over the age of five and put two chickens in every pot.

That pretty much ignores the fact that David Greenway is a 32 year old with zero experience in mining other than as a promoter. As President of SNS he was most notable for having spent the remarkable amount of $1.80 an ounce to outline a silver resource at a time you can buy silver in the ground for $.20.

The difference between what is claimed and what is reality can be found in a recent order from the Bankruptcy Court curing the financial defaults. SPMI claimed $13,773,919 in damages, they were awarded $60,000. About 4.35% of what they wanted. SNS Silver got a whole lot better; indeed, David Greenway termed it "a significant administrative claim." He wanted $842,821.21 and got $147,229.99, almost 17.5% of what he said was fair.

I have known Minco Silver for years. They are a real mining company that won an award as Prospector / Explorer of the Year Award at the annual China Mining Congress & Expo held in Beijing in November of 2008. They have a major silver project at Fuwan showing a silver resource of 157 million ounces of silver. The feasibility and permitting is making major progress as they move toward construction of a plant in China. They anticipate production in 18-24 months.

Robert Mori would do anything to cancel the lease he wrote with Sterling six years ago. Silver is three times higher. The value of the Sunshine is far greater for anyone capable of solving the many very real problems with the mine and mill. Minco can solve those problems and it is adequately financed. Mori's interest is not in saving the Silver Valley, Mori's interest is in keeping control of the Sunshine. It's all about money. It's not going to happen. He signed a lease and that's it. He has taken money for 6 years on that lease and he can't cancel it because he wants more money.

The next move at Sterling in the bankruptcy is for an asset sale to take place. I anticipate Minco will probably end up with the lease on the Sunshine and Sterling will disappear into the ashes of time. It was poorly managed and it deserves to go away.

Having a real mining company with real management will be far better for the Sunshine and the Silver Valley.

Minco Silver has been as low as $.30 in November of 2008 and as high as $2.45 in May. We are coming into the very favorable time of year for silver and gold. I expect Minco to go higher. When the dust settles from the bankruptcy, I expect them to go far higher.

Minco Silver is an advertiser and I hold options on the stock. I am a consultant to Minco Silver and as such it would be reasonable to expect me to be biased. I was also a consultant to Sterling in 2003 and an early shareholder in SNS. I do not hold shares in either Sterling or SNS Silver today. But we used to be close, Barbara actually came up with the name for SNS Silver.

Minco Silver Corp
MSR-T $2.00 (Sep 8, 2009)
MISVF-OTCBB 31.2 million shares
Minco Silver website

Bob Moriarty
President: 321gold

Disclosure: 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.

321gold Ltd