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 majors.

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 price.

metalin@attglobal.net Merlin Bingham 208-665-2002
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 cent zinc.

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 explorer.

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 314%. 
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 million. 
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 at

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 companies!

Additional Articles:

Metalline Mining: 4.9 Billion Reasons Why -- by David Zurbuchen, Feb 2006

Metalline 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 "resources".

MMGG messageboard

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: