Junior Silver Stock Report
Jason Hommel
June 19, 2004

About 40 weeks ago, I produced a report on 17 silver stocks for Gold-Eagle.com.  It rocked the silver stock market.  Every silver junior stock listed was up in the following week, and every major silver stock was down the following week.  Why?  Because for the first time, a large number of people were informed about other competing investing options than the five major silver companies that get all the press, Hecla Mining (HL), Cour d'Alene (CDE), Apex Silver (SIL), Pan American Silver (PAAS), and Silver Standard (SSRI). 

Those companies have the largest market caps, and are the most expensive, and so, I feel they are not the best investments available.  HL for example, has a P/E ratio of 29.  CDE, for example, is losing money, and is in debt again, and is using their shares to try and acquire Wheaton River, which, I also feel is not among the best companies you can buy.  Think about this:  If CDE is using the investment strategy of trying to sell their own stock to acquire other companies, can't you do a similar investment strategy, and sell your stock of CDE to buy something better?  SIL, for example, has such a large market cap, that it overshadows their large Bolivian silver project, and thus, the cost of the silver in the ground is as high as $1.81 per ounce when you buy SIL shares.  However, if you buy another silver company, such as EXR.V or ASM.V that trade on the Venture Exchange in Vancouver, you can get silver ounces in the ground for about $.14 to $.17 cents per ounce, which is less than 1/10th the cost of SIL.  ASM.V even has existing infrastructure, and SIL does not!

Of those five big companies, I believe Silver Standard is the best.  They have the most silver for the cost, of the five, and they understand the silver story, and have even decided to hold 20% of their cash in the form of silver bullion while they continue to look for properties, and as they wait for higher silver prices to develop their properties to the production stage.  But SSRI's strategy was to acquire silver ounces in the ground very cheaply.  I decided to buy the juniors myself because I felt that I could employ SSRI's strategy myself.

More in general, a few years ago, when the bull market in precious metals was getting started, many commentators said that in the second leg, the juniors would be the place to be.  Well, I think we've had our first leg up, and that now, we have just completed a base for the second major move upwards in price.  I feel now is the time to be invested in the juniors, and now, I don't own a single company with a market cap of more than $100 million dollars.  At the moment, my portfolio consists of about 15% silver bullion, and almost all of the rest in silver junior exploration stocks.

Since that first report, I've continued to cover as many silver companies as I can, from 80 to over 110 companies now.  This is a comparatively concise report on a few of the best companies.  To get my full report, you can sign up at goldismoney.com

Disclaimers, Warnings, and Advice: I have gathered the information below over the course of nearly a year. I believe it is accurate to the best of my ability. I have made mistakes in the data from time to time. I'm human. I have collected the information from public sources such as company web sites and public information found at yahoo.com to get the stock prices. This report in no way guarantees the accuracy of the information below, since the information may change at any time. The number of outstanding shares can change as a company engages in new share issues to raise more capital through private placements, or if outstanding warrants (and options) are exercised and converted into shares, or if shares are bought back. Shares can be consolidated, or split. The number of ounces of silver in the ground can also change, as these are often only estimates. The number can also change up or down, depending on drilling results.

This report is not investment advice.  This report contains information that may or may not be up to date, and may be inaccurate.  I urge you to contact the company and do your own research to verify the information contained in this report.

Given my bias in favor of much, much higher silver prices, then, to me, the grades of silver are far less important than buying more oz. in the ground.  More oz. in the ground at a lower cost is the most important consideration for me. 

My method is simple. Cost per ounce in the ground. How much do you get (silver reserve totals), and how much does it cost (market cap)? The cost is the market cap divided by the silver reserve totals. Cheaper is better. Buy low, sell high. 

Silver juniors with significant measured silver resources in the ground.
CZN.TO CZICF.PK (CANADIAN ZINC) 
SRLM.PK (STERLING MINING)
MGN (MINES MANAGEMENT) (I own shares)
SVL.V  STVZF.PK (SILVERCREST MINES) (I own shares)
EXR.V  EXPTF.PK (EXPATRIATE RESOURCES)
ASM.V ASGMF.PK (AVINO SILVER GOLD) (I own shares.)

Explorers without measured resources in the ground:
CDU.V  CUEAF.PK (CARDERO RSCS)
OTMN.PK (O.T. MINING) (I own shares)
NPG.V NVPGF.PK (NEVADA PACIFIC GOLD) (I own shares)
* CBE.V CBEFF.PK (CABO MINING) (I own shares)
KG.V KDKGF.PK (KLONDIKE GOLD) (I own shares)

Please check the company websites for the latest information, and be sure to call the company before making an investment decision.

CZN.TO CZICF.PK (CANADIAN ZINC) 
http://www.canadianzinc.com/
czn@canadianzinc.com 1-866-688-2001
78.5 mil fully diluted shares as of June, 2004
 @ $.75/share Cdn x .73 US/Cdn = $.55 US
$43 mil MC
$14.6 million cash, Cdn, no debt.
not mining ($20 mil needed to finish & start the mine) ($100 mil worth of mining infrastructure in place!)
~70 mil oz. (IN ZONE 3 only!! of 12 zones! This company seems to be greatly under-reporting their silver reserves. Their 18 year mine plan consists of zone 3 only, but there are 12 mineralized zones on the property.)  Really, perhaps well over 100 mil oz. silver.
$43 mil MC / 70 mil oz. = $.61/oz. 
You get "approx" 9.72 ounces in the ground for 1 oz. silver's worth of stock.

Additional comments:  Canadian Zinc Commences Exploration Program At Prairie Creek, NT

CZN likely has much more silver in the ground, and has good profit potential. 

To get the mine up and running, they might be able to pay back debt financing within 2 years, but I would hope they would avoid debt, and raise the capital in additional financings.

I note several very, very positive things about this company.

1. This was the mining operation set up by the Hunt brothers, the major silver investors in the silver spike to $50/oz. in 1980 who were bankrupted by their own debts and margin calls as a result of the COMEX rule changes and silver short sale manipulation. The Hunts spent $50 million building infrastructure to build the mine. They were 90% complete when bankruptcy hit. The value of those buildings is now perhaps over $100 million, and the mine only needs about $20 million (CAN) ($15 mil US) to get the mine up and running. That's much cheaper than other cost estimates of other operations.
2. The 70 million oz. of silver estimate is for zone 3 only. But there are 12 zones on the property. The zone 3 estimate is for a 10 year mine plan that involves mining zone 3 at current metals prices.
3. High Grade ores: 
12% zinc/ton; = 240 lbs. zinc/ton x 50 cents/lb. = $120/ton for the zinc.
10.1% lead/ton = 202 lbs. lead/ton x 40 cents/lb. = $80/ton for the lead.
6 oz. silver/ton x $6.95/oz. = $42/ton for the silver.
0.4% copper/ton = 8 lbs. copper/ton x 1.30 cents/lb. = $10/ton for the copper.
Total: $249/ton!   Prices accurate as of Mid Feb., 2004
4.  My method of valuation:  I'm really counting only the silver, not the base metals in my "oz in the ground" valuation.  So consider a significant "zinc bonus", and "lead bonus".
5.  Zinc and base metals prices headed up?  Currently, 45 cents/lb. for zinc!  Check http://www.metalprices.com/ for updates. 

SRLM.PK (STERLING MINING)
http://www.sterlingmining.com/
RDemotte@aol.com Ray DeMotte 208/676-0599
12.2 mil shares outstanding (May 31, 2004)
16.6 mil shares fully diluted (May 2004) --(I use fully diluted whenever possible in my market cap calculations)
@ $6.00/share
$100 mil MC
~185 mil oz. reserves + resource, Sunshine alone
Quote from: http://www.sterlingmining.com/jun112003.html
"The prior operator last estimated the mine reserves at 26.75 million ounces of silver, 10.36 million pounds of copper and 7.05 million pounds of lead (or approximately 28.85 million ounces of silver-equivalent), as well as an additional resource of 159.66 million ounces of silver. "
Other properties:
Baroness   15 mil -- tailing project, no further exploration potential.
Tesorito      17 mil -- + exploration potential
sa              14 mil  -- + exploration potential
Total:  231 mil oz. silver
$100 mil MC / 231 mil oz. = $.43/oz.
$100 mil MC / 550 mil oz. = $.18/oz.  (exploration potential)
You get "approx" 13.8 ounces in the ground for 1 oz. silver's worth of stock.
(Exploration potential is 33.)

Additional comments:  I wrote an article on SRLM in late Dec.  See: Sterling Mining

Ray DeMotte really, really understands the silver story, and has been aggressively acquiring silver properties.   Sterling continues to consolidate its land position around the Sunshine mine. 

Sterling Mining acquired the Sunshine mine. Sunshine had "more than 360 million ounces of production over the past century" and was one of the big three: Hecla, Couer, & Sunshine. Sunshine went bankrupt. Sterling got the property a few months ago cheap, because they were quick & willing to pay cash. Other buyers wanted to do a full study before making an offer. This company's share price went ballistic as a result. But the company is still way undervalued. Just do the math, people. There were a few great articles written lately for SRLM. See the company web site, above. The best factors, I feel, are as follows:
1. The Sunshine mine is an existing mine that was mining at a profit. The company went bankrupt, not the mine. So there will be no great capital costs for start up, only minimal costs.
2. The Sunshine sits on 1/2 sq. mile, and was never fully explored. Sterling Mining owns 10 square miles of property surrounding the Sunshine, right in the heart of silver country, the location of CDE and HL, the other two big companies at the top of this list.
3. The management of Sunshine understands the silver story. They are on a mission to acquire distressed silver properties at today's cheap prices. See also: December 14, 2003: "In light of the continued low silver price, Sterling has this year begun holding back into inventory a portion of this year's silver coins minted."

* MGN (MINES MGMT) (I own shares)
http://www.minesmanagement.com/
info@minesmanagement.com (509) 838 6050 Doug Dobbs
12.4 mil shares fully diluted (April 2004)
@ $4.05/share
$50 mil MC
261 mil oz. silver resources.  Previous drilling spent over $100 million drilling the property.  
$50 mil MC / 261 mil = $.19/oz.
You get "approx" 31.0 ounces in the ground for 1 oz. silver's worth of stock.

Additional comments:  Mines Management Completes Interim Mine Plan for Montanore Silver Project
Thursday June 17

"The revised mine plan, as currently conceived, envisions an operating capacity of 12,500 tons per day, yielding average annual production of approximately 7.8 million ounces of silver and 32,000 tons of copper, at a capital cost of approximately $236 million.  "

"The cash operating costs of the project remain attractive at approximately $12.14 per ton, taking into account inflation offset by increases in productivity from improved mining methodology and technology."

As copper moves up 5 cents/lb., it adds $100 million to the value of the deposit. 
As silver moves up $.50/oz., it adds $130 million to the value of the deposit.

Mines Management owned 10% of the rights to their property in Montana. The other 90% owner, Noranda, simply gave up on the property and walked away from their mining claim due to "perpetually" low silver prices and political concerns.   That explains the rocketing share price.  So, the MNMM group got 90% of the rest of the property FOR FREE!--the value of which, and the nature of this transaction has just barely begun to be understood by the market, given the low relative price.

Their property also has about 60% of the value (at current prices) in copper (copper recently at $1.24/lb.), 2 Billion pounds of copper, and 261 mil oz. of silver.  Doing the math:
261 mil oz. silver x $5.70/oz. = $1.487 Billion.
2 Billion lbs copper x $1.24/lb.. = $2.5 Billion.
Total value of mineralization before costs to extract, $4.0 billion.  It was recently a high of: $4.8 Billion.   This number increased from around $3 Billion just a few months ago!

They do not have an active working mine--which is a minus.  They will need to raise capital to get a mine going: $236 million current estimate. 

Regarding environmental concerns:  Noranda had a fully approved Environmental Impact Statement (EIS) that led to successful project permitting, so environmental concerns were not a factor in Noranda's departure of the project in 2002.

For more on MGN (formerly MNMM) see
http://www.thebullandbear.com/bb-reporter/bbfr-archive/minesmgmt.html

Mines Management has a new Message Board at Yahoo! Finance:
http://finance.yahoo.com/q/mb?s=MGN

I own shares of MGN. 

* SVL.V  STVZF.PK (SILVERCRST MINES) (I own shares)
http://www.silvercrestmines.com/
info@silvercrestmines.com (604) 691-1730
25.9 million fully diluted March, 2004
@ $.83/share Cdn x .73 US/Cdn = $.61 US
$16 mil MC
$3 mil cash in the til.
Now the Honduras and El Salvador "Resource" totals 43 million
plus the exploration potential of 40 - 100 million in Honduras
plus Mexico, --see news release from last month,
plus Guatemala another unknown but geologically similar to main property in Honduras and El Salvadore all three are within 25 miles from each other.
Silvercrest added 14.3 million oz. of resources at El Zapote, El Salvador, 4-6-04
The range of exploration potential is between 89 - 149 million oz.
$16 mil MC / 89 = $.18/oz. 
$16 mil MC / 149 = $.11/oz. 
You get "approx" 33.8 ounces in the ground for 1 oz. silver's worth of stock.
(Exploration potential = 56+ oz.)

Additional comments:  April 6th: SilverCrest Reports El Zapote Resource Estimates
http://biz.yahoo.com/bw/040406/65883_1.html
--Silvercrest added about 14 million oz. of silver resources in the April 6th press release. 

March 17th: Silvercrest closes El Salvadoran (El Zapote) Acquisition
http://biz.yahoo.com/bw/040317/175900_1.html

The project in El Salvador is only 20 km from the property in Honduras, and the property in Guatemala is 15km away, so only one mill will be needed for the three when a production decision is made.

Currently drilling El Zapote, El Salvador.

I own shaers of SVL.V

EXR.V  EXPTF.PK (EXPATRIATE RECS)
http://www.expatriateresources.com/
info@expatriateresources.com 1-877-682-5474 Dr. Harlan D. Meade, President and CEO
103 mil shares fully diluted June 2004 (including the Atna buy out)
@ $.23/share Cdn x .73 US/Cdn = $.17
$17 mil MC
$1.2 mil CAN capital in the till no debt.
Mostly a base metals company:  Zinc.  Also has some silver & gold.
Total metal content of the six projects with resources... "Using current metal prices, the gross metal value of Expatriate's interest in the base metals in the properties is approximately US$1.56 billion as compared to US$540 million for its share of the silver and gold."
Metal:  Expatriate share of the project:
Zinc      2.67 billion lbs.
Copper  385 million lbs.
Lead      202 million lbs.
Silver     63.1 million oz.
Gold       426,700 million oz.
Gold x 10 = 4.3 mil "silver equiv".
(+ 33 mil oz silver from the buy out of Atna's portion of the Wolverine project)
$17 mil MC / 100 mil oz. silver = $.17
You get "approx" 34.5 ounces in the ground for 1 oz. silver's worth of stock.

Additional comments:  Expatriate Purchases Atna's Interest in Wolverine Deposit, Yukon
Excerpt: 

Purchase Agreement Terms

Expatriate will acquire Atna's 39.4% interest in the Wolverine Joint Venture for cash payments of $2 million, the issuance of 10 million common shares (the "Transaction Shares") and 5 million share purchase warrants (the "Warrants"), each Warrant entitling Atna to purchase one common share of Expatriate at a price of $0.32 for two years from issuance

Wolverine is rich in precious metals containing about 75,000,000 ounces of silver and 352,000 ounces of gold.

Thus, Expatriate is acquiring 39.4% of 75 million ounces of silver (29.5 mil oz.), and 39.4% of 352,000 ounces of gold.  The gold portion, at 10:1 ratio, is (3.5 mil oz.) of "silver equiv".  Thus, I'm adding 33 mil oz. of silver to my prior total.  I'm also going to add in 10 million common shares, and 5 million warrants, for an additional 15 million shares fully diluted.  To help evaluate the acquisition, that's 15 mil shares fully diluted at .27 Cdn x .74 = .20.  .20 x 15 mil shares = $3 mil MC US + $1.48 mil US cash = $4.48 mil MC / 33 mil oz. silver = $.135/oz. acquisition cost.  This is significantly less than the current cost of the company's resources, or about $.22/oz., thus I see the acquistion as good for existing shareholders of Expatriate at the moment.
 
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.  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 zinc.

* ASM.V ASGMF.PK (AVINO SILV GOLD) (I own shares.)
http://www.avino.com/
shares@avino.com 604 682-3701 -- David Wolfin
10.5 mil shares outstanding.
12.5 mil shares fully diluted (June 2004)
16.5 mil shares fully diluted (including, and after the purchase of remaining 51% of the Avino mine)
 @ $1.20/share Cdn x .73 US/Cdn = $.88 US
$14 mil MC
from:    http://www.avino.com/other/goldstock100197.html --in 1997
"How Much Silver Does Avino Have?"
"Operations at Avino's silver mine in Mexico are both open-pit and underground. I examined the reserves and interpolated the tonnage into silver ounces as follows: 28-million ounces proven; 50-million ounces probable and 27 million ounces possible." (Not all are 43101 compliant reserves & resources.--that is an old, third party report.)
--focus is on being silver company. A plus.
They actually have over five silver properties/projects.  I'm only have numbers to count for one, the "Avino mine". 
= 28 + 50 + 27 = 105
Avino owned 49% of that, or 51.5 mil oz., prior to the purchase agreement for the remainder for an additional 4 million shares.
$14 mil MC / 105 mil oz. = $.14/oz.
You get "approx" 43.4 ounces in the ground for 1 oz. silver's worth of stock.

Additional notes: There are 4 additional silver properties that I don't have numbers for.  Consider this a "silver bonus"!!!

Mexican mining law once stated that a controlling interest had to be owned by Mexicans, which explains why they only have a 49% interest.  That they don't have a controlling interest is a minus. This law has changed. The mine was operational until the mine went into temporary closure in November 2001. So there is in place an existing mine, with working infrastructure, which is a bonus.  There is a need for drilling in order to test the potential that was stated in the feasibility study.

(I own shares of ASM.V)

CDU.V  CUEAF.PK (CARDERO RSCS)
http://www.cardero.com/
hvanalphen@cardero.com  Henk Van Alphen -- President (604) 408-7488 
32 million shares fully diluted Dec. 11th , 2003
@ $2.65/share Cdn x .73 US/Cdn = $1.93 US
$62 mil MC
($17 million Cdn cash in the treasury)

Additional comments:
Cardero has three silver properties in Argentina; two main silver exploration properties:  Chingolo and Providencia. 

Providencia -- high grades of silver, former silver mine, could have 100-250 mil oz.
Chingolo -- Henk says, "may have 400-600 mil oz. "exploration potential" in 200-300 mil tons of rock."  They got 30-40 grams (1.23 oz.) on the first drill hole, but hope to find 2-3 ounces silver/ton. 

June, 2004: Company quote: "The Company is actively evaluating silver, gold, copper and iron-ore projects which will ensure the recognition of Cardero as a world-class exploration and development company."

I spoke with Henk in Vancouver about those iron properties, and I spoke with an expert on iron.  I had previously read that iron had doubled.  The story that I heard was that iron was selling for about $23/ton, but it has recently increased to as high as $150/ton in some futures contracts.  That's a huge move.  However, iron may be selling for about $50/ton at present, with perhaps a prior spike to $100. I really don't know where to go yet to verify that price info.  Further, I heard that some of the most profitable and largest mines in the world are iron mines.   Although my main investing interest remains in silver, I am aware that mine construction will require both energy, and yes, iron for the mills, the tracks, the carts, the heavy machinery, the tractors, trailers, dozers and trucks!

AOT.V ASOLF.PK (ASCOT RSCS)
http://www.bmts.bc.ca/aot/
1 604 684 8950
39.7 fully diluted. (Nov 2003)
@ $.30/share Cdn x .73 US/Cdn = $.22 US
$9 mil MC (US)
----
Additional comments: They own 5.82 million shares and 388,000 warrants of Cardero at $.35, which usually is a greater asset value than their market cap. Ascot's share price is typically around 80% of the value of their Cardero Stock.)

(I'm listing this one out of order, not by market cap, and next to Cardero, because of their position in Cardero.)

It may be better to buy Ascot than Cardero, depending on prices.  Check the math, and call Ascot to verify Cardero stock holdings, and number of shares.

* OTMN.PK (O.T. MINING) (I own shares)
http://www.otmining.com/ 
info@otmining.com Jim Hess Tel: 514-935-2445
12.8 mil fully diluted  (May 15, 2004)
@ $3.40/share
$43.5 mil MC
Montana
Historic silver production for the Butte district, from 1880 to 2000 was 714,643,005 oz. silver.
They think their deposit may be bigger than "the richest hill on earth", which is located near their property, in the Butte district. 
The exploration potential for this company is astounding, if they are right.

It's 'Our Turn' For Silver
by Greg Kyle June 16, 2004

 Here is a comparatively busy message board for O.T. Mining:
http://ragingbull.lycos.com/mboard/boards.cgi?board=OTCF:OTMN

A nearly abandoned message board for O.T. Mining:
http://www.siliconinvestor.com/stocktalk/subject.gsp?subjectid=21081

I own shares of OTMN.PK

* CBE.V CBEFF.PK (CABO MINING) (I own shares)
http://www.cabo.ca/
jav@cabo.ca (604) 681-8899 John Versfelt, President
Fully diluted subtotal, including shares needed to acquire two drilling companies, which is contingent upon a financing.
= 18,880,436 as of February 9th, 2004 (Post-Consolidated) not including recent financing, which still needs approval by the exchange, and when added, will increase the market cap by about $10-11 million or so?
@ $.91/share Cdn x .73 US/Cdn =  $.67
$12 mil MC

Additional Comments:  If you want to see the company move forward with the approval of the most recent financing, and the acquisition of the drilling companies, please contact John Versfelt at jav@cabo.ca  (604) 681 8899, to get the shareholder approval form, or you can download it from http://www.cabo.ca/

Mineral Property Acquisitions Near Sudbury, Ontario, Exploration Update & $7.187 million private placements closed.

I wrote an article on Cabo on February 10th.  Market Perspective & Cabo Mining - Hommel

In the article, I highlight what I feel is Cabo's most imporant asset:  control of 60% of the mining camp of Cobalt, Ontario.  The "silver capital of Canada" produced historically, over 500 million ounces of silver.

To learn more about the mining camp town of Cobalt, there is a fascinating article detailing the history of the silver camp at http://www.cobalt.ca/cobalt/history.htm

I own shares of CBE.V

* KG.V KDKGF.PK (KLONDIKE GOLD) (I own shares)
http://www.klondikegoldcorp.com/
70 mil fully diluted (Nov. 2003)
@ $.195/share Cdn x .73 US/Cdn = $.14 US
5 year high .30
$10 mil MC

This company has many silver and gold properties.  Dennis Fong is also involved with GNG.V, Golden Goliath.

Klondike has one silver property that could be producing within weeks.

(I own shares of KG.V)

Jason Hommel
goldismoney.com

Final Disclaimer:  I have not received any compensation from any public silver stock company for writing up my weekly report on "Silver Stocks--Comparative Valuations".  I own shares of the following 17 silver stocks: ASM.V, CMA.V, PLE.V, PDO.V, AUN.V, EDR.V, KG.V, MGN, CBE.V, NPG.V, SVL.V, MMGG.OB, TM.V, OTMN.PK, FCO.TO, KRE.V, FR.V.  These are required disclaimers by the SEC: whether I've been paid, and what I own.   I believe the SEC intended this to be a cautionary note that I own these shares, not as a recommendation or endorsement.  I reserve the right to buy or sell any stock at any time.  I believe the SEC does not require a disclosure regarding finder's fees.  Nevertheless, I have begun to receive "finder's fees" from a few companies.