Sunrise at Sunshine

By : David Bond

Editor, the Wallace Street Journal

Wallace, Idaho - We hate to say, “We told you so.” But we told you so. A scant four years ago, beginning with a vision comprising mostly whole cloth, Sterling Mining Co. and its president, Ray DeMotte, have just rounded 3^rd base and are streaking towards home plate at the Sunshine silver mine.

We took an immediate liking to Ray, smoking cigarettes on the front porch of his tiny office in downtown Coeur d'Alene, shortly after he, as president of Sterling Mining Co. (which has been around since 1903) had negotiated with American Reclamation's Robert Mori to spare the Sunshine Mine from the scrap heap. Bob Mori, who had earlier scrapped the late Sunshine Mining Co. mill in Silver Peak, Nevada (now in Silver Standard's possession, in Texas), must have been sorely tempted to do the same with the Sunshine Mine, with its miles and miles of copper wire, steel track, stull-yards of exotic shaft timber, its transformers and electric motors. But Mori held off, and gave DeMotte (in exchange for some SRLM stock) a chance to resurrect the place.

DeMotte's next challenge was to persuade Shoshone County's commissioners not to foreclose on the Sunshine Mine for back taxes owed by defunct Sunshine Mining Co. This is how bad things had got there. Not only had Sunshine Mining Co. let the mine go to hell while it threw good money after bad into a difficult property in South America, they weren't even paying their local property tax. The miners saw the writing on the wall when the company's brass, comprising a miserable Boise lawyer and a couple of foot-loose Texans, pulled the exploration headings at Sunshine. Many fled to Stillwater, Pogo, Greens Creek, in the months before Sunshine Mining Co. lagged-over the Jewell Shaft collar and filed for bankruptcy.

Not an easy thing for a European-educated MBA descended from a coal-mining family in England and a penchant for stamp-collecting from California's Bay Area and the rat-hole cubicles of Bechtel to step in to. But he did. When first we met DeMotte, a few days after he had done the Sunshine deal with Mori and had relocated from the Bay Area to Coeur d'Alene, he told us of Sunshine: “I am not going to reopen that mine until I am damned sure I won't ever have to close it again.”

Sterling Mining's on-the-ground crew at the Sunshine Mine now totals 77 folks. The Sterling Tunnel has been completed and the contractors paid. The Jewell Shaft has been fully rehabilitated, as has the secondary hoist at the Consolidated-Silver property, which is the Sunshine's “back door” exploration platform and secondary escape-way.

On the way to all this a tiny but vicious and noisy contingent of Sterling shareholders (they totaled about 3 percent when it came to nut-cutting time three months later) started slandering DeMotte for his plodding, bull-headed progress at Sterling. They wanted instant glory-holing, not new transformers and pumps and batteries and wiring and motors which are the backbone of a hard-rock silver mine. And they were ticked off that they hadn't sold their Sterling stock during its brief and uncalled-for run-up to $13 and thought they could steal the mine away from Sterling for a few thousand bucks. The attack got nasty and personal, even reaching down to this lowly writer, when a failed Wallace banker who didn't know the difference between Yen and Canadian dollars used his juice to get us kicked out of the Wallace Elks Lodge. And it had to be nothing short of agonizingly hurtful for DeMotte. But he soldiered on . . .

And now to the news:

Sterling finished what likely will be its last financing, in Toronto, of US$24,734,755.50, that will fund the Sunshine Mine through start-up of production in December of this year and well into 2008, at which point cash flow should be well enough positive to maintain on-going reserve development. Heavy Toronto hitters are now involved: not to drop names or anything, but think TD and Sprott for starters.

Secondly, SRLM shares, which toiled since 1903 for 100 years on the much-maligned Pinks and its predecessor exchanges in Spokane and elsewhere, will go directly to the Toronto Stock Exchange, the TSE having granted preliminary approval for same, also just last week. There will be no “Dot-V” appendage to their shares. Do not pass Vancouver, and do not pay $200.

We don't talk much about stock prices in this rant, because it's not our field of expertise. But even one of Sterling's former detractors told us privately he thinks the TSX listing is probably a double-bagger from SRLM's current $3.50-ish range. And while we don't talk much about stock prices we can do some fairly simple arithmetic: for every 50 cents of Sterling market cap, there's one ounce of silver in the ground, much of it in the reserve categories. The industry as a whole values silver companies at nearly $4 per ounce, versus Sterling's 50 cents per ounce. And they are going into production in 6 months. Coeur d'Alene Mines paid nearly $6 per ounce for silver in the ground in Mexico recently, and no production dates have been set as meanwhile CDE shuts its splendid Rochester mine down and backs completely away from domestic silver mining.

So we kick back and, yes, We told ya so. Sterling's pumping the Sunshine down from its current water levels, using a newly-acquired technology that will keep the EPA out of their face, and any mining crud out of the Coeur d'Alene River. Next year, the first full year of production, they're looking at 2.8 million ounces of the precious white stuff. DeMotte has managed to attract some of the very best and brightest guys in the hard-rock mining business back to Sunshine and the Silver Valley. The place sparkles as it never did when the Texans had it. And the guys who work there, many of them our neighbours, are jacked at what they've done and what they intend to do, and that is for real.

So this is not solely about, “I told you so.” It's about a gentleman, a group of gents actually, who steadfastly refused to give up, onslaughts from a nose-picking newsletter writer and failed Wallace bank branch manager, and the slanders of a lame shareholder, and the vagaries of the silver market notwithstanding. Who believed not only in the future of the Sunshine Mine but in themselves. Tom Hanks' character, Jim Lovell, in the movie Apollo 13, had a great line, as he gazed up at the moon the night Neil Armstrong and Buzz Aldren descended the steps of Apollo 11 to walk on the moon's surface for the first time: “It wasn't a miracle. We just decided to go there.” Or words to that effect.

A few naysayers didn't get that it was possible. But there you have it: the Sunshine Mine is back in business. Ray DeMotte, take a bow.

By : David Bond

Editor : The Silver Valley Mining Journal

www.silverminers.com

Information contained herein is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. It is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed herein are those of the author and are subject to change without notice. The information herein may become outdated and there is no obligation to update any such information. The author, 24hGold, entities in which they have an interest, family and associates may from time to time have positions in the securities or commodities discussed. No part of this publication can be reproduced without the written consent of the author.