|
NOTE:
Originally published for Metal Augmentor subscribers on January 19, 2010 at 7:24PM EST.
Going
forward SILVERAXIS will return to its original premise, which is
“Dedicated to Investment Opportunities in Silver”. That means
less generic posts — for example those about gold or whatever else that
only peripherally touch on silver. So effectively non-silver commentaries
will be reserved for Metal Augmentor
subscribers, but the good news is there will probably be more free material
here that is specific or at least directly related to silver.
Here
is a new series that we may or may not keep up with, depending on how much
time we have and reader feedback. It is called Grounding the Hype and tries to analyze
and deflate excessive hype in metals and mining. We’ve done this type
of thing already with our commentaries in the past such as covering Paramount Gold and Silver and
more recently Premium Exploration.
While
we don’t want to focus on negativity and will certainly be viewed by
some company and industry insiders as “filthy” for exposing some
of the tricks and ploys that they rely on to make money on the backs of
unsuspecting investors, we have a strong desire to differentiate ourselves
from the typical newsletter, research and advisory crowd that in many cases
is in bed with the companies they are covering. We are not going to make
money that way and we want everybody to know that.
If we
are wrong about a particular situation, we will try to be the first to admit
that, but we won’t mind being called on it either. Importantly, we are
attempting to get at the whole truth, no matter how grainy and dirty, by
shedding light on uncertainty and questionable circumstances.
So
without further ado, here is our first official case study of Grounding the Hype.
Earlier today, we received a promotional advertisement that began as follows:
American
Company Discovers Massive ‘Silver Vein’… Below China’s
Great Wall
Govt.
surveys confirm 186 mile-long strike containing up to 30 billion
ounces… worth as much as $514 billion…
Go here to
learn more…
When
we clicked on the link, we were directed to a too-good-to-believe newsletter
promotion for Sound
Profits by Investor’s Daily Edge that
begins like this:
Dear
Reader,
Hundreds
of miles south of Beijing…
Deep
in the remote foothills beneath the Great Wall of China…
An
American junior mining company has made an amazing discovery.
This
silver strike stretches 186 miles. It could contain, by our estimates,
30.2 billion ounces of silver.
Oh,
brother!
Although
the name of the company they were talking about was immediately obvious to
us, we went over to Stock Gumshoe (a website we
recommend) before doing our own confirmation research to see if the detective
work had already been done. And indeed, it has been:
Today’s
holiday look is at a silver mining company with a mother lode strike in China
… this time, the tease is from the Sound
Profits newsletter by the Investors Daily Edge folks, and they
would, of course, be delighted to have you subscribe to their newsletter to
find out who this “Silver Striker” company is. Here’s how
they tease the stock:
[Ed:
not reproduced]
So who
could it be? We get a few other clues as we troll through the email …
[Ed:
not reproduced]
OK, so
that’s actually enough — the mine they must be referring to with
the 78,581 meters of drilling and 280 holes is the Ying mine, which is the
flagship property of and is roughly three-quarters owned by …
SilverCorp
Metals (SVM in both NY and Toronto)
SilverCorp
is not an American company, but they are US-listed (they’re Canadian,
with the actual operating businesses all being Chinese subsidiaries) —
but otherwise it matches the clues pretty much perfectly, including the $8
million in capital expenditures planned for the second half of this fiscal
year, and the 300 km (186 mile) long silver zone. And they did use SRK
Consultants China and BK Exploration in their resource estimate work.
SilverCorp
is a new favorite of many, many newsletters — I saw a video with Martin
Hutchinson where he alluded to his favorite Chinese silver miner and was
clearly hinting around SilverCorp, and Matt Badiali touted the shares last
Summer (I wrote about it at the time, and owned
shares for a while last year as well — I don’t currently own SVM
stock or have any other interest in the shares).
SilverCorp
gets attention not only for being the biggest silver miner in China, with a
tight relationship with the government and plenty of opportunity for
additional exploration, but for being one of the lowest cost miners in the
world. Thanks to significant output of both lead and zinc as
“byproducts” at the Ying mine they’re able to mine silver
at an effective price of something like negative $6 per ounce (meaning they
make money even before they sell the silver).
Does
their strike really run under the Great Wall of China? That I’m not so
sure about — it’s certainly possible, the Ying mine is near the
Luo River and from what I can tell from browsing a few maps the mining site
is fairly close to sections of the wall. Close enough for me.
In
response, I (silverax) will just repeat the comment I left on
the Stock Gumshoe:
There
is no worry from collapse of industrial demand for silver, the new uses
(batteries, solar, etc.) will at least offset any loss from traditional uses.
Instead, the main driver for silver going forward is physical demand.
With
respect to the tease by “Sound Profits”, my main issue would be
the extreme hype over the upside profit potential as well as the ridiculous
notion that Silvercorp. have discovered billions of ounces of silver. The
reader is being misled by the “stretches for 186 miles” to
believe this is essentially a lateral strike whereas in reality we are
talking about the combined length of workings and mapped vein structures,
many of which are stacked on top of each other (there is strong evidence the
Ying veins are mesothermal which means they run deeper along dip and not
necessarily far along strike).
The
above having been said, I personally believe Silvercorp could have very
significant upside potential over the longer term (perhaps 10-bagger) but for
that to happen there must be a general desire by resource investors to
understand and gain exposure to Chinese mining companies. Finally, the $49
annual price for Sound Profits is a very cheap cost of entry to find out if
there is actually substance behind their research once you peel away the
ridiculous hype.
As
with the Charlatan
Exposed series, please send along any requests for particularly
egregious examples that you would like to see addressed at Metal Augmentor.
Tom Szabo
Silveraxis.com
Tom Szabo
introduces The Metal Augmentor,
which will be the detailed coverage of mining
equities from junior explorers to major mining companies.
Subscription
is US$ 87 per year, and you will receive in addition the Mining
Equities Report: Cash is King?" which includes the following :
- Coverage of over 30 exploration and mining companies
trading near or below cash value
- Technical analysis charting on 25 of these
companies
- A robust, interactive Excel file
- Over 60 pages of material
- Free access to future, updated editions
Please click
here to subscribe or for more
information about the Metal Augmentor.
Copyright © SILVERAXIS.COM 2006
| 
