A comparison of two Zinc/Silver stocks:
Silver Stock Report
by Jason Hommel, February 24, 2006
Today, Western Silver (WTZ) moved up in price about 27% because it was
announced that Glamis gold is acquiring WTZ for about $1 billion.
Western Silver to be Acquired By Glamis
This is exactly the reason why so many of the newsletter writers like
myself are telling investors to buy the juniors: Because they
will be acquired by the majors. One of the benefits of the
acquisition (in addition to the obvious, the increased share price) is
the increased liquidity in the share price. Note the volume spike
on the chart! Today, many of the smartest and most forward
looking WTZ shareholders who were the bigger risk takers, have already
sold WTZ to acquire the next junior silver company. They will be
looking for other silver companies with large potential to attract the
attention of a major miner, perhaps one with defined resources.
The news of this acquisition is the type of thing that we newsletter
writers we were saying would happen, and this is just the start.
This is unquestionably and undeniably good for other junior exploration
silver stocks. In 2003, the Juniors were raising money like
crazy, as metals prices appeared to have come off their lows. In
2004-2005, many drilling results were announced. So much, in
fact, that it was hard to keep up, and results came out during a time
of low investor interest (which are two good reasons why I stopped
producing my long silver stock report in July, 2005--too much to do,
and few cared!) Now, in 2006, with skyrocketing base metals
prices, those juniors who found things will likely be bought up by the
Now, I didn't own WTZ, as I didn't think it was among the most highly
leveraged (and cheapest stocks) out there. When it was about
$10/share, it was valued at about $500 million, and today, is now worth
$1 billion, which I thought was a bit pricey for us smaller and more
nimble investors, but perhaps still cheap to those desperate majors who
need to replenish reserves and resources.
Western Silver used to be named Western Copper, but they could just as
easily be called Western Zinc, since they have more dollars worth of
zinc than anything else, as follows:
WTZ has the following metal resources, worth the following:
4.5 billion pounds of zinc x $.97/lb = $4.4 billion
339 million oz. silver x $9.7/oz. = $3.3 billion
673 million pounds of copper x $2.27/lb = $1.5 billion
1.3 billion pounds of lead x .57/lb = $.74 million
WTZ, interestingly enough, has just about the same number of shares as
my favorite silver/zinc stock, MMGG. Both have about 50 million
shares out. But MMGG trades at about $2.20/share, one tenth the
MMGG.OB (METALLINE MINE) (I own shares)
nearly 50 mil shares fully diluted (Feb 2006?)
@ $2.19/share US
$109 million market cap.
MMGG, has more zinc at higher grades than WTZ.
MMGG has 4.9 billion pounds of zinc, vs. 4.5 billion pounds for WTZ.
MMGG has 8-12% grades of zinc!
But what's the grade of WTZ's zinc? .7%, that's less than one per
MMGG has among the lowest cash costs to produce zinc in the industry at
$.25/lb. for zinc, (typically $.35/lb. or more for others).
And zinc recently traded at $1.10/lb.! And major zinc executives
have said that with increasing steel demand from developing nations
such as China, and reducing zinc supply, and long lead times to get new
zinc projects up and running, zinc prices are set to do nothing but
rise for the next two years, at the least.
MMGG also has silver. In fact, without the silver, I would not
have been interested in buying MMGG as I did two years ago.
MMGG has zinc and silver in Mexico at Sierra Mojada, which is a Silver
District, which produced silver in grades of over 30 ounces
of silver per tonne!
"The Sierra Mojada Property has produced in excess of 10 million tons
of high-grade ore that graded in excess of 30% lead, 20% zinc, 1%
copper and 1 kg (31 ounces) silver per ton that was shipped directly to
the smelter. The district has never had a mill to concentrate ore. All
of the mining was done selectively for ore of sufficient grade to
direct ship; mill grade ore was left unmined."
(That's 310 million ounces of silver produced historically. Who
knows how much silver is left?) That's the question with an
MMGG has proved up the zinc, but has not yet
focused on the very high grade silver.
MMGG also has a copper property that may have as much, or more,
potential as their zinc property!
Here's a 5 year chart of MMGG (Metalline Mining)
Let's go over this 5 year chart of MMGG.
By early to mid 2003, zinc prices had bottomed out at $.35/lb., and
silver had bottomed at $4.15/oz.
By the fall of 2003, silver and zinc prices started to increase.
From July 2003 to December 2003, silver stocks were up an average of
By January, 2004, MMGG was a laggard at only $1.60/share (up only 50%),
and was offering a private placement at $1 (rock bottom), at which
time, I and may others bought in as the company raised $8
Over the next year, MMGG spent this money on a drilling program and
proved up nearly 5 billion pounds of zinc. Money well
spent. In due time, MMGG's share price caught up to the rest of
the pack, and was up to $3/share.
By January 2005, the $8 million placement came due and was free
trading. Since there was little volume, the share price began to
drop from $2/share, as people either locked in profits, or sold out,
growing frustrated as silver prices and silver equities were flat or
declining in 2005. Further, MMGG was nearly broke, and trying to
raise more money at $1/share. People sold shares to buy in the
private placement again. (I refrained from hurting the company
like that.) This selling, to buy, temporarily drove the price
down to $.80. Recognizing the reasons for the low price, I bought
on the open market, and into the private placement.
By Jan. 2006, I promoted MMGG, for about the 10th time! From a
long term perspective, an average, or base price for MMGG is about
$2/share, despite the recent gains. Today, MMGG is no longer a
laggard, but appears to be leading the pack, considering recent gains.
It is not unreasonable to think that MMGG could continue to lead the
pack, and rise from $2/share to half the price of WTZ in short order,
which would be about $10/share. And as MMGG proves up some silver
and copper on other properties, and completes a feasibility study, the
price could rise well higher, perhaps up to $20/share.
Finally, look at the historical charts for zinc prices and inventories
You can see that zinc prices are headed up, as zinc inventories are
headed down. It's a very exciting time for investors in silver
companies who happened to be fortunate enough to buy silver zinc
Mining: 4.9 Billion Reasons Why
-- by David Zurbuchen, Feb 2006
Mining (MMGG) for the
long term Jan, 2006
Silver, Zinc, & Metalline Mining
-- Hommel & Duncan Hsia, March 19th, 2005
--one correction for the
article. The word "reserves" should be
Disclaimer: I own shares of MMGG, and nobody has paid me to write
up this report (except the natural free market incentive).
cc to Glamis, who is acquiring WTZ, via: