Expatriate Resources: Silver-Zinc Penny Stock

Silver Stock Report

by Jason Hommel, Sep 9,2004

I've been following Expatriate Resources since my weekly report #6 (about 44 weeks ago), when it was at $.26 Cdn/share.  The stock was popular among my readers due to the large silver/zinc resources and low cost of the stock, and by week #8, the stock had jumped 15% for two days in a row, and jumped 66% the third day!  I noticed the danger, and without selling, I warned my readers in report #8, as follows in the three paragraphs below:

I realized this week how few people are value investors, even readers of my report, which stuns me. This report is all about teaching people the fundamentals, and value investing. It seems people just don't believe that a good deal is really, truly a good deal, unless the price is moving up... and only then they will buy it.

Example: EXR.V this week moved up on Monday and Tuesday, about 15% each day. I was buying more of EXR.V on those days, painfully so, because of the rising price, then I stopped. And on Wednesday, the price of EXR.V jumped up 66%! I was stunned! Did all those people who bought on Wednesday just not realize the value of the stock until the price started trending up? Did I get in just in the "nick of time," or did my buying help cause a feeding frenzy? I don't know, but I suspect I was not "lucky," I suspect that my buying, based on the fundamentals of good value, helped to create further interest in the trend followers. I did not tell anyone I was buying, nor did I email any alerts on EXR.V. In fact, EXR.V has been in my silver reports numbers 6 and 7, so the opportunity was out in the open for everyone to see.

It is dangerous to be a trend follower. Readers! You need to learn to be leaders, and independent thinkers, who can trust the math and the logic of what you see. The next generation of wealthy people who will own the silver will need to be the entrepreneurs and business leaders. You cannot lead and follow at the same time.

On week #8 of my silver reports, EXR.V closed at $.42 Cdn., and Expatriate owned only 60% of the Wolverine project (today, it's 100%).  I wrote, you'd "get "approx" 13.8 ounces in the ground for 1 oz. silver's worth of stock."

People listened to my warning, and the stock dropped back the following week, which was contrary to my own interests, of course.  But a few months later it reached a high of about $.62 Cdn/share, at which time I sold to pursue other silver stocks, and private placements.

Last Friday, Expatriate closed at $.26/share, and I bought the stock back this week, after seeing the recently released news about the upcoming private placement.  I had been looking to buy since I met with Harlan at the New York Gold show, and again at the Vancouver show.  Most silver stocks had dropped back at about that time in April, as the silver price dropped from a high of $8.40/oz.

My updated company profile reads as follows:

info@expatriateresources.com 1-877-682-5474 Dr. Harlan D. Meade, President and CEO
122.9 mil shares fully diluted (July 23, 2004) (listed on the front page of the web site!)
@ $.26/share Cdn x .77 US/Cdn = $.20
$25 mil MC
$1.2 mil CAN capital in the till no debt.
Mostly a base metals company:  Zinc.  Also has some silver & gold.
6 properties.  Most of the value is concentrated in the 100% owned Wolverine Project.
Total mineralization across 6 properties:  97.2 mil oz. silver, 565,000 oz. gold, = 103 mil oz. "silver equiv."
About 3.8 billion pounds zinc, also some copper and lead.
$25 mil MC / 103 mil oz. silver = $.24/oz.
You get "approx" 27.4 ounces in the ground for 1 oz. silver's worth of stock.

Additional comments:  Significant zinc bonus, about 3 times the silver value.  Smelter credits are estimated at about 60% zinc, 25% silver, 10% gold and copper, and the rest, other minerals, but that assumes old low prices for silver, about $5-6?/oz.  My method of valuation puts a value on the silver only, not the rest, so this is a significantly better value than my number shows.

Call Dr. Harlan D. Meade, President and CEO 1-877-682-5474, and ask him to send you an information packet on EXR.V.  It contains a good report on why he is bullish on both silver and zinc.

Today, Expatriate is about as cheap as it has ever been since I first wrote about it in my report #6.

The gross value of the resources, at today's prices, is as follows:  

3.8 billion pounds of zinc x .42/pound = $1.6 billion
103 million ounces of silver x $6.20/oz. = $640 million
565,000 ounces of gold x $400/oz. = $230 million
Total: $2.47 billion
(not counting selenium or copper)

Now, why did people rush to bid up the stock price of Expatriate Resources within the last year?  I believe a significant reason was from watching the share price of Canadian Zinc (CZN.TO) and other silver/zinc plays.  Canadian Zinc moved up over 1000% from $.11 Cdn to a high of $2.00 Cdn as silver and zinc prices both rose off market bottoms, starting about the summer of 2003.  Another silver/zinc company was EuroZinc (EZM.TO), that also moved up around that time, from $.10 Cdn to $.79 Cdn.

There are some company updates to Expatriate that I would like to point out.

First, the company announced on Tuesday, Sept. 7th, that they intend to raise $8 million dollars for a final feasibility study.  Obviously, it will increase the share structure and market cap, but we cannot determine exactly, because the price of this placement depends on the share price at the time the deal closes over the next month or so.

Second, the company recently acquired a 100% ownership interest in their Wolverine property, their primary silver/zinc project.

Third, selenium!  See the last paragraph of the pdf file here:  http://www.expatriateresources.com/LetterMarch182004.pdf

Selenium has moved up in price recently ten-fold -- from $3/pound to $30/pound!  This is but one more example of commodities skyrocketing, and our dollar failing.  (Not just falling, but failing!)  Our economic system is not just meeting the needs of the people.  There are many other commodities with similarly astounding gains; Cobalt, nickel, iron, oil.  I would not know anything about Selenium were it not for looking at Expatriate.  

I cannot emphasize how important this is, when so many commodities are exploding in price like this.  Something is seriously wrong in this "paper dollar economy"!  Certain commodities, the most desired ones, the ones with a potential monetary demand component, such as silver and gold will not only catch up to the price performance of these other ones, but will surely far outpace them--because of future monetary demand.  Oil has increased in the last few years from $10/barrel to $50/barrel.  But the public will never desire to store $5000 worth of paper money in oil!  What will they do?  Put 100 barrels of oil in the front yard?  That's just way too impractical.  But anyone can go and buy a 90% bag of silver that weighs 55 pounds, that costs under $5000, and put it in their closet at home.  

So, back to selenium and Expatriate resources.  Normally, when ores are taken to the smelter, they look at the work that will be required to separate the elements, and then charge their fees based on the work.  Selenium used to be an "extra cost" because of the extra work to remove it from the ore.  It was called a "contamination".  Today, however, the increased price for selenium makes Expatriate's ore a bonus.  At today's prices, they wouldn't separate out the selenium to throw it away, they would separate it out because it is valuable, and thus, Expatriate would be granted a credit!  They currently estimate that Expatriate's ore could supply 15% of world selenium demand!  

Now, I don't know what profits that may work out to be, but if the company is trying to raise $8 million dollars in this environment of low silver prices, they must be very confident that they can turn a profit at current metal prices.  Furthermore, undoubtedly, the recent price of $.62/share may well help Expatriate to more easily raise the $8 million they are looking for.

Production is not expected until 2006 at the earliest.  First, they need to raise the money for a final feasibility study, and then produce a final feasibility study, and then if it still looks good, they will need to raise perhaps another $100 million Cdn to bring the project to production.  Rough estimates are to produce 7 million ounces of silver for a 10-year mine life, with production cost among the bottom 1/4 of silver/zinc producers.  And, of course, those are all understood to be estimated and rough numbers until they produce a final feasibility study.

Expatriate has an excellent web site.  They list the fully diluted shares right at the top left corner of the web site, and news releases are listed right below, right on the front page.  It's easier to find information there, than at my own web sites!  They have a few press releases on the zinc market that are well worth reading.

The management of Expatriate are experienced professionals.  Harlan Meade, president, is a geologist (also with a degree in Business Administration) who has taken other properties to production.  Excerpt from the company web site:

Previously, Dr. Meade was Vice-President Exploration and Environment of Westmin Resources Limited from 1992 to 1997, continuing as Vice-President Exploration through February 1998. He played a major role in the exploration and/or development of several deposits currently being mined by Westmin's successor company.

Today, Sept. 8th, Expatriate released positive drilling results.  Headline:  Expatriate Discovers New Massive Sulphide Showing in Finlayson District, Yukon.  13.4% zinc and 40g/t silver.

Final Disclaimers and Warnings:  Please be careful about being an aggressive buyer of stocks on the internet after reading an article online.  One of the reasons why I write about specific companies is to showcase examples of good values within the silver stock sector.  But remember, there are many alternatives.  I also own plenty of Metalline Mining (MMGG) which trades on the bulletin boards, US, (MMGG.OB at Yahoo!). Metalline is another silver/zinc company.  A few other silver/zinc companies are, Grupo Mexico SA de CV (GMBXF.PK), Apex Silver (SIL), Farallon (FAN.TO), Huldra Silver (HDA.V), and Abcourt (ABI.V).  Given my methodology, currently Expatriate compares very favorably on my silver stock report, along with several other companies, such as Mines Management, Avino, Abcourt, and Capstone.  You can signup to receive my weekly report that covers the market caps of about 85 silver stocks, or read the archives of my prior reports, at silverstockreport.com or goldismoney.com.

Expatriate has not paid me to write this article, and I own stock in Expatriate Resources.
Jason Hommel