Silver Stock Report #3

Silver Stocks III — Comparative Valuations

By: Jason Hommel, The Silver Stock Report

What’s new?  A bit more commentary in response to all the letters and questions regarding my valuation method.  Also, more silver stocks, 39 total now.  The one-page executive summary is right up here at the top.Price of silver is $4.80 as of Friday, 2pm, Oct. 3, 2003, which was used to calculate the following figures. The CAN $ / US $ conversion factor is .7439.  I will use .75 for ease.Stock Symbol     Silver oz. in ground for 1 oz. silver’s worth of stock. HL                   .52 –current producer
WHT                  .77 –current producer, only 10% silver
CDE                 2    –current producer
GRS / GAM.TO        3.66 –current producer
MFN / MFL.TO        4.07
SIL                 4.7
EXN.V               5.5
FSR.TO              6.6
MR.TO / METLF.OB    6.3
PAAS                8.6  –current producer
WTZ / WTC.TO        9.9
MGR.V / MGRSF.PK    11.6
SSRI                13.2 
* CZN.TO / CZICF.PK     16 –high grades can mine at a profit now, low start up costs
TM.V / TUMIF.PK         17.5 
SVL.V / STVZF.PK        23
ADB.V                   28
CFTN.PK                 29
MAI.V / MNEAF.OB        30 –silver “equiv.”  real silver quantity unknown  
ECU.V                   35 –has a large gold bonus
* SRLM.PK               43 –recently acquired the Sunshine mine.
* FAN.TO / FRLLF.PK     49 –low grade; only 4/16ths explored; may have 3x more silver. 
* MNMM.OB               52 –has a large copper bonus, expensive start up costs
* ASM.V / ASGMF.PK      59 –owns 49% of a prior working silver mine.Explorers (by market cap):
TVI.TO / TVIPF.PK  –current producer of a dore silver bar 96% silver, 4% gold
* NPG.V / NVPGF.PK   68-338
ITRO.OB* = I own sharesTo quickly “tab” down to the company you are interested in, note the symbol. Then hit “control-F” to “FIND” the symbol below. Then, you will go directly to the summary about that company. Since this is a long document, that is much easier than trying to scroll down.I don’t know why the price of silver dropped so heavily this afternoon.  But it’s clearly an opportunity to buy both the silver stocks, and physical silver.  The investors who are most skittish and sold are the ones who lost the most, as they no longer own the silver shares that are so explosive to the upside as we saw last week.  And the holders of silver futures contracts who likely turned sellers got the losses they deserve.  See my essay, “The Moral Failures of the Paper Longs.” single number in the table above represents the number of ounces of silver in the ground you are buying title to when you invest the equivalent of one ounce of silver by buying shares in the company at current prices.  (It does not include zinc, or copper, or lead, but it does include gold at a 1:10 ratio of gold:silver.)Why not include the copper or zinc, or lead, like I include gold?  I’m a silver investor because silver is money.  But not today, it’s not.  But it will be.  When the monetary demand for silver hits the silver market, like it inevitably will as the dollar continues to fall, the price and value of silver will skyrocket like you cannot comprehend or calculate.  Think 1930’s depression: a day’s wage was a silver quarter–a silver quarter that you can buy for less than a dollar today… Think about that long and hard.  Now, add on top of that the silver shortage and panic, and a day’s wage may well end up being a silver dime or less–temporarily for a few years, until the silver mining boom corrects things.  But compare that to the other metals.  Look, nobody will ever use the equivalent of a dollar of zinc, or three pounds of zinc, as a day’s wage, nor will people use that as money to take to the store to buy stuff. (Yes, I know our “tokens” are made of zinc, but that’s besides the point.)  The point is that copper and zinc may have favorable supply and demand dynamics that favor rising prices, but not like silver, not even close.  I can’t even begin to quantify the difference, but it’s huge.  So huge, in fact, that I believe it’s simply a waste of time to try to put a comparative price on zinc and lead for the future that I envision is inevitable.  A zinc investment may double, or even tripple, but when I expect silver to rise 100 fold, and silver stocks to rise 1000 fold or more, then a double comes out to a loss by way of comparison.  To avoid that kind of loss, and to steer my investment dollars in the right direction, I simply give no measurable value at all to the other metals, and instead, I merely look at them as “a non-quantifiable” bonus.Please note that an entire mining company CANNOT be summed up by a single number, and I’m not trying to do that.  The number is just a place to get started with when doing comparative analysis, as there are many, many other factors to consider.  Nevertheless, I believe this number is the most important factor, given my bias and expectation for much, much higher silver prices.  In contrast, if you expect silver prices to remain flat, or decline, then this number is virtually meaningless to you as an investor in silver stocks, and all you would care about is low cost mining, high grade reserves, and high earnings.Just as companies have a price to earnings, or “P/E” ratio number, silver stock companies should also have a “silver in the ground” to price ratio, or S/P ratio, that I’m trying to show.  Price, in this case, is market cap as denominated in silver (instead of dollars).Please note that at the moment, I’m counting all “oz. in the ground” as equal, but they are NOT EQUAL.  Some are more certain than others, which are more speculative.  They range from most certain to least certain such as: proven reserves, probable reserves, indicated resources, inferred resources. Therefore, to increase the accuracy of this number, I will need to get my hands on a chart, showing the percentage of certainty level for each category, and then multiply by that to get better figures to use.  Anyone out there ever seen a chart like that? For now, I’m treating all oz. as the same, which does not give the most accurate picture, but it’s a start for now.I don’t really have numbers for the explorers, because we just don’t know how much silver they have yet…The more I compile and add to the list, and the more I learn about the silver stock market, the more I’m convinced that my investment choices are outstanding values.  Also, I’m getting a better idea that there is a range of stocks that have great value today.  There is not just one or two or three anomolies of outstanding value, there is a range of several to choose from in the undervalued area.  The larger range gives me comfort that these extraordinarily great values are the natural result of the end of a 20+ year (unnaturally created) bear market in silver.I see in the charts that several of the silver stocks I’m continuing to find have trended up since about June, 2003, some having great moves up in September, 2003.  Perhaps a very large buyer swooped across nearly all silver stocks he could find in September, or perhaps we are seeing the market react to silver crossing $5/oz.  Looks like enthusiasm is spreading across many of the silver stocks.  The cheapest price now seems to be about 8-12 cents/oz for the silver in the ground.
What happened to the market in silver stocks since last Friday to this Friday? HL                   .52   $5.20    $5.20   0% change  
WHT                  .77   $1.90    $1.84   down 3.1 %  
CDE                 2      $3.07    $2.98   down 2.9%   
GRS / GAM.TO        3.66
MFN / MFL.TO        4.07   $7.91    $7.20   down 9%
SIL                 4.7    $14.03   $12.70  down 9.5%   
EXN.V               5.5    $.165    $.15    down 9%
FSR.TO              6.6    $1.30    $1.10   down 15%
MR.TO / METLF.OB    6.3
PAAS                8.6    $10.03   $9.34   down 6.9%   
WTZ / WTC.TO        9.9    $3.70    $3.30   down 10.8% 
MGR.V / MGRSF.PK    11.6   $1.68    $1.62   down 3.5% 
SSRI                13.2   $6.65    $6.24    down 6.2%   
* CZN.TO / CZICF.PK     16     .67 CAN   .62   down 7.4%    
TM.V / TUMIF.PK         17.5   .85    .87       up 2.3%
SVL.V / STVZF.PK        23    1.30   1.07     down 18%
ADB.V                   28
CFTN.PK                 29     .38       .35   down 7.8% 
MAI.V / MNEAF.OB        30 
ECU.V                   35    .125       .11   down 12%
* SRLM.PK               43    4.40      4.53     up 2.9%   
* FAN.TO / FRLLF.PK     49     .28      .315     up 12.5%
* MNMM.OB               52    2.97      3.20     up 7.7%   
* ASM.V / ASGMF.PK      59     .80       .81     up 1.2%  ***
* NPG.V             68-338     .52       .61     up 17% * = I own shares
*** Avino had the wildest ride last week.  At one point it was up to $1.30 or so.  I did not buy or sell any shares of Avino last week. Those are numbers from Friday to Friday, just this last week. 
————-This is a list of primary silver stocks.  Granted, some listed might not be appropriate for the list, such as WHT, since only 10% of production comes from silver.  I don’t list the big gold miners that produce a lot of silver, such as Barrick, or BHP Billiton, because silver is a very tiny portion of their profits.  You just won’t benefit very much from a silver boom by owning Barrick.  Nor do I list the major zinc, copper, or lead miners, who also produce a substantial amount of silver each year, again, for the same reasons.  If their production of silver is 2-3% of their profits, and silver goes up by a factor of seven, then it just does not accrue to their bottom line like it would a primary silver miner.A word about liquidity.  As you will note, most of the primary silver miners in the world no longer mine, or make very little money at it.  This is one very compelling proof that that silver is too cheap.  And the market capitalization of the “primary silver mine” sector is very small.  There are not even any silver stock funds that exist that I’m aware of.The little silver stocks are not suitable vehicles for quick trading in and out based on 10-20-50 cent moves of the silver price.  If you try that, I think you will get creamed on your commissions, and on the spreads, since the bid and asks are quite wide, sometimes about 15%–and are even wider if you trade in any volume that moves the price.  Trading out means you will miss the big run ups, when the stocks “gap up,” never to look back, as they sometimes do.  These are long term buy and holds.  Only sell if you have another silver stock you think is a substantially better value.  I believe the silver move is a long term play.  I think you should be utterly convinced of the long term bull in silver, and be able to wait for silver’s day to come, before you use my valuation method to buy the tiny market cap silver stocks.Why are the spreads so large?  Same reason you are buying.  The previous buyers are long term holders.  They are also waiting for a the big silver move to come.  They are in, likely because they can afford to wait while the stock prices languish until the big move up on the silver price that we all are waiting for.  Therefore, there is little reason for them to sell for a mere 15% gain.  They know the story in silver, and have sometimes sufferred stock prices going to zero as prior silver miners went bust.  Such high risk demands greater returns, and thus, higher spreads.  But I think the risk of bankruptcy is greatly disappearing, since we are clearly at the beginning of the bull market in precious metals.I count a company’s ounces of gold as 10 oz of silver. Why? Because I have a positive bias in favor of silver over gold. Now, I’m wildly bullish on gold, believing it can go to $35,000/oz. or higher to infinity, due to a dollar currency collapse.  One reader on the Yahoo! boards for HL expressed my bullish sentiment as if I was predicting “seven times infinity” for silver.  That sure is a funny way to put it.  Basically, I believe silver has seven times greater upward potential than gold at these prices, and that the dollar will eventually go to zero.Since the dollar is fraud, and since there are people who read this from around the world, it makes little sense to quote a CAN or US dollar price for a stock.  Also, all fiat currencies are unjust weights and measures.  If people buy a silver stock for the silver, the stock and the assets should be priced in silver, since you are literally “giving up” the opportunity to buy silver when you buy a silver stock.  You are buying the silver stock instead of silver.  Therefore, it just makes sense to look at silver stocks as “silver cost per silver oz. in the ground”.I know this valuation method, of measuring the “cost per oz in the ground”, and method of expressing it, is not perfect.  There are many other factors to consider.  Let’s consider the grade of the silver ore for a moment: high grade vs. low grade.  Let’s look at an extreme scenario of very different grades.  Here is the math problem to solve: In the current price environment of $5.10/oz for silver, Company “A” can mine silver for a $1.00/oz, and company “B” can mine at $5.00/oz., but given the stock prices of the two companies, Company B gives you three times the silver resources as Company A when spending an equal amount of money on each company’s stock.  Assuming that all resources can be mined, what does the silver price need to be in order for the profits of the two companies to be equal? A Cost: 1/oz.
B Cost: 5/oz.  B: (x 3 resources.)Profit = price (X) – cost.Profit A = X – 1
Profit B = 3(X – 5)Profits of A and B are equal when solving for X in the following equation:X – 1 = 3(X – 5)Let’s try $6/oz.  
X = 6?6-1 = 3(6-5)  
5 = 3 … nopeX = 7?7-1 = 3(7-5)
6 = 6 YES!Therefore, if silver is $7/oz, the profit potential of the two resources of company A and B are the same.  And if silver continues to go up, then buying Company B with lower grades, and three times as many ounces in the ground for the same price was well worth it.And how much more profit goes to company B if silver is $25/oz?B = 3(25-5) = 3(20) = 60
A = 25 – 1 = 2460/24 = 2.5  The lower grade silver, at higher costs to mine it, and at lower cost to buy it as a shareholder where you get 3 times as much silver in the ground for your comparable investment dollar, gives 2.5 times the profit when silver reaches $25/oz.But the real world examples are more extreme.  In many cases, you can get well over 10 times as much silver for the same price, not merely 3 times.  So they are well worth it.  And the high grade silver companies, like HL, cost about $3.70 to mine it, not 1.  So, if you invest a comparable amount of money today in two different companies, and then, the value of silver goes up to $25/oz., what happens to the value of the company’s oz. in the ground? Avino = today: 50 oz.($5-6?) = no value.  At $25/oz. =  50($25-$6?) = $950
CDE = today: 2 oz.($5-$3?) $4.          At $25/oz. = 2($25-$3?) = $44Note again those ounces and what they are worth today.  The broad market does price them that way now.  Avino is a steal.  CDE’s ounces cost just over $2.00 to buy!   Why pay $5 for something that will head to $44, when you can pay $5 for something that will head towards $950 during a monetary crisis and silver shortage?So, I’m not saying CDE won’t profit from higher silver prices.  They will.  I’d just rather profit more than I think CDE’s stock will in a silver bull market.Therefore, 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.Disclaimers, Warnings, and Advice: I have gathered the information below over the course of several months. I believe it is accurate to the best of my ability. I may have made mistakes. I probably did. I’m human. I have collected the information from public sources such as company web sites and public information found at 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.In order to get the latest information, call the company you are interested in. They love to hear from interested investors, and they have the time, since most are not actively engaged in mining or “running a mining business”. Their main business right now mostly consists of drumming up investor interest so they can raise the capital to drill and explore their properties so that they can raise the really big capital to start up an active mine.This information is not intended as a solicitation for any company.All total estimates of “ounces in the ground” can vary widely. There are “proven and probable reserves” which are the highest category of certainty which is obtained through many drill holes, and then at the least accurate, there are “inferred resources” which are hardest to estimate. Additionally, every miner always has “more silver properties that need to be explored, which probably contain more silver”. For the purposes of this report, I have added all those numbers together. It is believed that all these “ounce in the ground” estimates can be profitably mined at $5-6 per ounce silver, or lower. Thus, I believe that when silver trades for $15/oz. or above, that all of these ounces can be mined at a substantial profit.I may be wrong. (I made a few mistakes in my last article, and there have been updates and corrections made.)Mining is a risky business. You need to be willing to sustain a total loss of your investment for various unforeseen accidents. Silver stock companies can do stupid things to shareholders such as take on debt, or issue more stock at too low prices which reduces the percentage of the company you may own (dilution). Yet, they need to issue shares to raise capital for drilling, and then an even bigger dilution to build a working mine. They may sell YOUR silver too cheaply, or worse, hedge the price of YOUR silver just as it begins to go up if they lock in a price which then proves to be too low if the dollar is destroyed. Mining is a risky business as estimates of assets in the ground can change. There is political risk and environmental risk. They can’t franchise the business, are stuck in one location, are subject to government confiscation, or taxes, or union wage negotiations, and corporate looting.Do your own research. Be responsible for your own investment decisions. Again, please, before investing in a mining company, call up the company, and speak either with the CEO or the Investor Relations contact person.So, at the very least, check the company web site, read the annual reports, check my numbers, check my math, and email the company. That’s what they are there for, to answer your questions, and to speak about the opportunity of the company. Don’t trust everything you read over the internet. I am a biased source. I own silver mining stocks. And I’m not a broker, nor an investment advisor. I’m just a private investor trying to make sense of this crazy world, and sharing my information and thoughts on silver companies.This report may be copied, and transmitted by other people, and may become outdated by the time it reaches you.I can’t tell you how you should invest your money, of course. The reason is that I don’t know how convinced you are of the silver bull market, nor do I know how soon you will be needing the money back, so I don’t know how long you can wait to see results, nor do I know how much liquidity you need. Nor do I know the size of the money you have to invest. It is very hard to invest large quantities of money in a small market cap stock.Ticker symbols:  Many of these companies have several ticker symbols.  All of the symbols I list such as “FAN.TO” are symbols that can be used to find the price quote at yahoo finance, which is free.  The symbol is the “FAN” part, and the exchange is the TSX or TSE (Vancouver or Toronto).  The “.V” or “.TO” part is what yahoo finance needs to look it up.  On msn finance, it looks like this: CA.FAN. These types of symbols quote the price in Canadian dollars.  The other symbol for Farallon is “FRLLF.PK”.  This gives the price in dollars, and is the symbol for investors in the U.S. using U.S. brokers.  (A US citizen can use a broker in Canada, but you don’t have to, that’s what the pinksheets are for.) The “.PK” part stands for “pink sheets,” and is used to look up the symbol at Yahoo finance.  At MSN finance, or, you don’t need to enter in the “.PK” part, but you have to use “FRLLF” and not “FAN”.  The different symbols, “FAN.TO” and “FRLLF.PK” are the same stock.  The data is often not entered in for the pinksheets quotes very frequently, so prices update perhaps a day slower.  When buying on the pinksheets, there is usually an extra commission spread (1-3%) due to the exchange rate, and the additional broker you go through. That being said, my investment strategy seems to be working for me, so far. And so, here is how I have valued the following silver companies to make my own investment decisions.HL
Phone: (208) 769-4100
109 mil shares @ $5.20 share 
$570.8 million Market Cap (MC)
near zero debt, cash: $113 mil
(est. 2003 production 9 mil oz. silver) 
(the La Camorra gold mine, 412,000 oz gold.) … (x 350/5 = 28 mil silver equivalent oz.)
San Sebastian silver mine, (proven & probably reserves) 8.7 mil (produced 3 mil)
the Greens Creek silver mine (proven & probably reserves) 31 mil (produced 3 mil)
the Lucky Friday mine (proven & probably reserves) 14 mil. (produced 2 mil)
Total silver = 53.7 million oz.
Plus 412,000 oz. gold x 10 = 4.1 mil oz silver equiv.
Total silver equiv. reserves = 57.8 mil oz.
$571 mil MC  / 57.8 mil = $9.87/oz.
Cost: 1.92 times an ounce, for 1 oz. in the ground.
The inverse: you get .52 ounces in the ground for 1 oz. silver.Additional comments: HL has more oz. than listed in the “proven & probable” category. As Daniel A. Barnes of Malcolm H. Gissen & Associates, said, “The nature of narrow-vein mining makes it impossible to infer the length of the vein, and hence, the ultimate number of ounces in it.” So, they don’t list them, or don’t know about them.It seems as if companies typically report that this latter, less reliable category of “inferred and indicated resources” tends to be about 5-10 times as large as the “proven & probable” category.  But even if we assume ten times more silver for HL, they still have a high relative cost of about $1.00/oz.But how much silver in the ground do they need to have in order to have a “competitive valuation” to some of the cheap opportunities on this list, such as 30 cents/oz.? That would be: “market cap / competitive silver price of 30 cents/oz. = oz. in the ground.” $571 mil MC / $.30/oz = 1.9 Billion ounces. That’s a big assumption that they have that much, isn’t it? That number is 33 times what they say they have in proven & probable reserves. But I know nothing about mining. I’m just doing math, and showing the obvious.Another way to check the value of HL is too look at profit, since they are active miners. They mine 9 million ounces of silver a year. What’s the profit on that today? Very little. Total production costs are $3.68/oz. Profit at $5.25 is $1.57/oz x 9 mil oz. annual production = $14.3 million annual profit. Give a PE of 571/14 = 40. That’s a very high P/E, which means HL is expensive. What will they earn if silver is $15/oz., and production stays the same? The $10 increase in price would be pure profit, or $90 million. So, $14 mil + $90 mil = $104 mil. Thus, we might expect their market cap to be ten times that, or $1,040 million, to create a P/E ratio of 10. Thus, we could expect silver to go up 285% to $15/oz., and expect HL’s stock price to increase from $571 mil to $1040 mil, or a 82% increase. Thus, silver is a WAY better value than HL stock, and has much greater upside potential from here, if you are a value investor who anticipates higher prices for silver.HL is only one company of two with a listing on the NYSE. This may be their advantage, and also they have been around for over 100 years. So, HL benefits from the market myth that “there are only a handful of silver companies to choose from”. This report will clearly show that is simply not true.I heard that HL has properties in Mexico and Venezuela that they are exploring. But I found little info about that at their web site.Also, why does HL hold $113 million dollars worth of cash at the beginning of a bull market in silver?  It makes no sense to me.  Cash is trash in inflation.  They should be buying physical silver, or, use that cash to buy other silver resources in the ground.  Allow me to expand on this very important point.Silver (and gold) is money.  The industry that competes with the miners is the banking industry.  Miners produce money, the banks produce lies and fraud.  But the banks have better public relations teams, and they even have the miners convinced that the banks produce money.  (Poor deceived miners.)  For a miner to hold cash is like saying, “My own product is worthless and not money.”  For a miner to hold silver as money is like saying, “I believe my product is money, and I acknowledge that the banks are my direct competitors, but who in reality are con artists who perpetrate fraud, which is why you should invest in my company instead of holding on to bonds or paper money.”  And such actions speak much louder than my words ever could.If a company holds silver in preference to dollars, this expresses many, many positive things in addition to the above.  It also says that the company will avoid debt.  It says the company will avoid hedging.  Both actions are outstanding for shareholders.  It says the company will try to realize the best price when selling their silver.  Again, great for shareholders.  And all of these things are said at once when wrapped up in the action of holding silver in place of dollars.  But Hecla says the opposite when it holds paper dollars in the bank in preference to holding silver on their own.On the one hand I think they are fools for having so much cash (trash). On the other hand, I think they must be marketing geniuses for managing to convince the market that they deserve such a high share price.The other reason for a junior miner to accumulate physical silver is to make themselves a more attractive take-over target for a major who may be short physical silver, and who may need to acquire physical silver at any cost, and who may not be able to cover their positions by buying futures contracts that may default.Silver companies who begin to produce silver, and begin to have profits should strongly consider the wisdom of!accumulating physical silver in preferance to accumulating cash in the bank. If Goldcorp is any example, investors are willing to greatly reward a company with a much higher share price if the company holds gold or silver instead of cash.If miners won’t lead the way and teach their own investors that gold and silver is money, who will?  Me?  Ok, I’ll try my best, but come on, a little help please? 
431 mil shares @ $1.85
$797.7 mil MC 
zero debt, cash: $27 mil 
P & P & inferred = 8 mil gold equiv oz. 
annualized production of: 425,000 ounces of gold and six million ounces of silver
Someone emailed me and said, “WHT so far mines 50% gold, 40% copper  and
only 10% silver which later on  will be even less.”  Those numbers make sense:
425,000 oz. gold x 70 = 29.7 mil silver equiv.  
6 mil silver actual, which is 1/5th of the gold at today’s prices.  
Thus, it is likely that only 10% of WHT’s P & P & inferred of 8 mil gold equiv, is silver.
The 8 mil “gold equiv” oz. likely uses a 70:1 silver:gold ratio (current prices) which gives 560 mil oz. silver equiv.  10% of which is likely silver, which is 56 mil oz.
The rest, the 90% of gold and copper, I’ll count at 10:1 ratio, which is 8 mil oz. x .9 x 10 = 72 mil oz.  56 + 72 = 128 mil oz. “silver equiv” using a 10:1 silver:gold conversion factor.
= 128 mil oz. “silver equiv”
= depletion in 10 years.
= production oz. to dollars x 350 = $148 mil gold, x 5 = $30 mil silver
= earnings $.12/share. (multiplying 2nd quarter 2003 earnings by 4) P/E = 15.8
$797.7 mil MC  / 128 mil oz. = $6.23/oz.
Cost: 129% of an ounce, for 1 oz. in the ground.
The inverse: you get .77 ounces in the ground for 1 oz. silver.Additional comments: Wheaton River is ramping up production. The PE is 15.8 (not bad), but most of their profits come from gold, not silver (only 10%).  Obviously, my method of valuation simply does not work when a company has such a large gold componant in production, and such a small silver componant.  But those people who are interested in a silver miner, or silver stock for exposure to rising silver prices should avoid WHT.  This does not mean it is a bad company, nor overvalued with respect to its gold mining peers.  My bias is simply to avoid investing in gold companies, and to head for silver, and my valuation method reflects that well, and steers me in the right direction, which is away from WHT. Some will say that HL, CDE and WHT should not be on this list, since they have a large gold componant to the value of their company.   But this “comparative valuation” is only intended for silver bulls who are invested in WHT for the silver, to show them they should probably seek silver value elsewhere.  Even though WHT mines 6 mil oz. of silver each year, it’s just not worth investing in WHT for the silver exposure, because the percentage of silver is too small.CDE 
178 mil shares 
@ share price $2.98
$532 mil MC
Debt to/ E = 1.17 (converting debt to shares)… (may add ~40-100 mil shares)
cash $38 mil
San Bartolome (Bolivia) reserves 146 mil silver
Silver Valley Silver reserves 32 mil silver
Rochester reserves 43 mil silver
Cerro Bayo reserves 3.7 mil silver
Total: 224.7 mil silver
(to Produce 14.6 mil oz. silver in 2003)
$532 mil MC / 224.7 mil oz = $2.36/oz.
Cost: 49% of an ounce, for 1 oz. in the ground.
The inverse: you get 2 ounces in the ground for 1 oz. silver.Additional comments: They also have a NYSE listing. Maybe that explains things. Maybe some institutional money managers are limited to NYSE silver stocks. Or maybe people think a NYSE listing means “credibility”. I don’t. CDE is also a significant silver producer, 14.6 million ounces/yr. And I think that is a negative to sell silver when it is so cheap. Debt is another negative.
Phone: (902) 468-0614
@ share price $3.30
fully diluted 52 mil shares
$131 MIL MC
“With the drilling of over 179 holes totalling over 33,700-metres, the resource calculation contains 761,000 gold ounces and 38.2-million silver ounces in the measured and indicated categories and a further 925,000 gold ounces and approximately 45-million silver ounces in the inferred category.”
Total gold: 1.7 mil oz. x 10 = 17 mil silver equiv.
Total silver: 83 mil oz. 
Total silver equiv = 100 mil oz.
$131 MIL MC / 100 mil oz. = $1.31/oz.
Cost: 27% of an ounce, for 1 oz. in the ground.
The inverse: you get 3.66 ounces in the ground for 1 oz. silver.Additional comments:  At current prices of a 70:1 silver:gold ratio, about 58% of the company is in gold, 41% silver.  Gold equiv oz. is about 3 mil oz. total.  Cash cost is $85/oz.  Life of mine is 7 years.  At $385 gold, should produce $900 mil oz. profit over the life of the mine. Not bad for the current $182 MIL MC… even though the “silver in the ground” cost is currently high.  Therefore, my valuation method undercounts the gold componant, and undercounts current producers.  But that is intended, however, because I believe silver has over 7 times the potential as gold.  My comparison method does not say that the companies that cost more can’t bring a reasonable profit to the shareholder.  My comparison method does tend to say that the profits will be higher for the silver companies that cost less.There’s just not a lot of silver exposure here for the price, and because of the high gold componant, it is costly, relative to others.  But with the high grades, the risk is lower, and the profits should be here for those who want more safety in a stock pick.And they are “rapidly expanding” resources & reserves with round-the-clock drilling of 4 rigs.MFN / MFL.TO
31 mil shares @ $7.16
$224 mil MC
measured & indicated 2.3 mil oz gold, 116 mil oz. silver inferred 1.1 mil oz. gold, 40 mil oz. silver
Totals: 3.4 mil oz. gold, 156 mil oz. silver. 
~ silver conversion = 3.4 x 10 = 34 mil silver equiv + 156 mil oz. silver = 190 mil oz. silver 
(only 40% is silver, the rest gold)
$224 mil MC / 190 mil oz. = $1.17/oz.
Cost: 24% of an ounce, for 1 oz. in the ground.
The inverse: you get 4.07 ounces in the ground for 1 oz. silver.Additional comments: In case you have not realized it by now, this list is organized from most expensive on top, cheapest at the bottom. Read on.SIL 
36.6 mil shares @ $12.78 
$468 mil MC
San Cristobal (Bolivia) (proven & probably reserves) 454 mil silver
(forecast capital costs for construction to total approximately $435 million)
(Produced zero silver in 2002)
$468 mil MC / 454 mil oz = $1.03/oz.
Cost: 21% of an ounce, for 1 oz. in the ground.
The inverse: you get 4.7 ounces in the ground for 1 oz. silver.Additional comments: Still way too expensive. This one has a lot of zinc. That’s an added bonus that is not factored in. Several writers have been saying zinc prices will be heading up soon, so that’s an added bonus. And, they are not mining now, but are waiting for higher silver prices. That’s also a plus. The management also seems to understand that silver will move upwards a lot. Another plus. Finally, George Soros, Billionaire, owns a bit of this one, just under 10% I read recently. Another plus.I once advocated buying SIL. At the time, I thought there were only 5 real silver companies to choose from, and this was in the top 3, in the group of SSRI, PAAS and SIL, and excluding HL and CDE. I was wrong. There are many silver opportunities, not just five, and this is one of the most expensive, even with the zinc bonus. So, I sold SIL for better opportunities.  So far, it was a good decision for me.EXN.V 
2002 annual report: 
48 mil shares outstanding 
@ share price $.15 CAN x .75 = $.1125 US
$5.4 mil MC
indicated = 63,400 t x 2738 g/t x .0353oz./g = 6.1 mil oz. silver
inferred = 2100 t x 1,433 g/t x .0353oz./g = .1 mil oz. silver
“gross in-situ value of mineralization is $31.4 million.” 
$5.4 mil MC / 6.2 mil oz. = $.87/oz.
Cost: 18% of an ounce, for 1 oz. in the ground.
The inverse: you get 5.5 ounces in the ground for 1 oz. silver.Additional comments:  “Excellon …is exploring and developing”…. “a Bonanza grade Silver deposit in Mexico.”  Well, perhaps the bonanza grades explain the high cost to buy them as a shareholder at current prices.  And perhaps there is a high expectation of finding more high grades.  I don’t know how to estimate or quantify hopes very well.  Given what they’ve explored, drilled, and put into the “indicated and inferred” category, they certainly seem expensive.  Perhaps this one should be in the “Explorer” category.FSR.TO
37 mil shares 
@ share price price $1.10 (CAN) x .75 dollar/CAN = $.825 US
$30.5 mil MC
From the Company’s main page at their url:
“As at December 31, 2001, First Silver’s mineable reserves were 12 million ounces of silver and inferred resources totaled 30 million ounces of silver. The mine is developing a 1000 plus meter exploration drift to upgrade currently identified inferred resources to mineable ore reserves and to discover new reserves.”
12 + 30 = 42 mil oz.
$30.5 mil MC / 42 mil oz. = $.72/oz.
Cost: 15% of an ounce, for 1 oz. in the ground.
The inverse: you get 6.6 ounces in the ground for 1 oz. silver.Additional comments: This is a high grade producing miner.  The high grades are a plus.  But the extra cost for the oz. in the ground hardly seems worth it if you are expecting much higher silver prices as I do.  Some say that a producing miner is also a plus. MR.TO / METLF.OB
Ritch Hall, 303-796-0229 ext. 304
42.5 mil shares outstanding  (2003 1 Qtr report)
@ share price $2.15 CAN x .75 = $1.61 US
$68.5 mil MC
“The capital cost to develop the mine is estimated at $28.2 million.”
Need to confirm: 
METLF Metallica 90 mln ozs Ag  –email tip was the source
$68.5 mil MC / 90 mil oz. silver = $.76/oz.  
Cost: 16% of an ounce, for 1 oz. in the ground.
The inverse: you get 6.3 ounces in the ground for 1 oz. silver.Additional Comments:  I did not confirm the quote of 90 mil oz., and I did not see where I could confirm it at the company website.  This is not an investment I’d consider, given the price/oz., so why bother?  The only reason I list it here is to show that there are others that “may be” more expensive, and to continue to make my list more comprehensive.  I will try to confirm the number at a later date.PAAS
52 mil shares @ $9.33
$486.3 mil MC
D/E .08 cash: $12 mil.
10 silver properties (3 in production)
produced 7 mil oz. silver in 2001:
February 2003 presentation reported total reserves including peru stockpiles of 874.3 million ounces
earnings -$.77/share???!!!
$486.3 mil MC / 874.3 mil oz. = $.56/oz.
Cost: 11.6% of an ounce, for 1 oz. in the ground.
The inverse: you get 8.6 ounces in the ground for 1 oz. silver.Additional Comments: PAAS is one of the few silver producers on this list. Thus, they are a “silver miner” as their investor relations person will painstakingly point out. The other companies who do not mine silver, but merely own silver properties and drill them, are not “silver miners,” nor are they “silver mining companies”. They are “silver properties,” or “silver opportunities,” or “silver speculations,” I guess. Ok, but that still does not justify selling silver at firesale prices, in my book.PAAS recently went into debt in order to ramp up production. I am strongly biased against debt. But it’s a convertible debenture, so the debt can be converted into stock. They know and believe higher silver prices are coming, which is great, and their strategy is to be in solid production mode when the higher price hits. In the meantime, though, the extra production will delay the inevitable silver boom, and they are destroying shareholder value. I also advocated buying PAAS. And I recently sold. I sold because I think there are better opportunities out there.WTZ / WTC.TO 
(formerly western copper)
34.3 mil shares  (Oct. 2003)
@ share price $3.28 US
$112.5 mil MC 
(not actively mining)
From the “SNC Lavalin Resource Calculation” March, 2003.
Indicated 158.8 mil oz. silver
Inferred   54.6 mil oz. silver
Total 213.4 oz. silver.
Total 1.94 oz. gold x 10 (at 10:1) = 19.4 silver equiv.
The capital cost of the project to get the mine going is estimated to be US $148,628,400
$112.5 mil MC  / 232.8 oz. = $.48/oz.
Cost: 10% of an ounce, for 1 oz. in the ground.
The inverse: you get 9.9 ounces in the ground for 1 oz. silver.Additional comments:  This week, I found higher estimates of “indicated & inferred” silver oz. at the company’s website.  (Updated March, 2003.–my prior data must have been older?)  (Plus 3.1 billion lbs zinc, and 1.3 billion lbs. lead.)  Note the capital cost to get the mining started: $148 million dollars.  MGR.V / MGRSF.PK
18.7 mil shares outstanding
share price $1.62 CAN x .75 = $1.215 US
$22.7 mil MC
inferred resource: 45 mil oz. silver + 1 mil oz gold.
1 mil oz. gold = + 10 mil oz. silver equiv
“The estimate does not address significant additional mineralized structures known to be present on the property, or the potential for large strike extensions of known high-grade zones.”
$22.7 mil MC / 55 mil oz. = $.41/oz.
Cost: 8.6% of an ounce, for 1 oz. in the ground.
The inverse: you get 11.6!ounces in the ground for 1 oz. silver.Additional comments:  Gammon Lake is a large shareholder, 50%.  The quote above comes from Gammon’s website. SSRI
40 mil shares (Oct. 2003)
@ $6.24
$249.9 mil MC
debt free, cash: $10 mil
not mining or producing
15 properties
measured and indicated resources totaling 300.4 million ounces of silver 
plus inferred resources totaling 366 million ounces of silver = 666 mil oz. 
2.2 mil oz. gold. Silver equiv = 22 mil oz. silver. (22+666=688 mil oz.) 
$249.9 mil MC / 688 mil oz. = $.36/oz.
Cost: 7.5% of an ounce, for 1 oz. in the ground.
The inverse: you get 13.2 ounces in the ground for 1 oz. silver.Additional comments: Finally, we are getting down to a good price. I also advocated buying SSRI, and I recently sold for about a 70% profit. Not because SSRI is necessarily bad, but merely because I wanted to buy what I felt were cheaper “ounces in the ground”.   SSRI continues to add to reserves, either through exploring, or through acquisitions.  This company seems to really understand the silver story, and helped to educate me as an investor, for which I’m thankful.  I’m a bit confused as to why they would want to mine silver at $6/oz., but perhaps they feel that will be the top of the silver bull market.  I could not disagree more, obviously.—————————————————————
—————————————————————Now, most of the better-valued silver companies that I will present below have much smaller market caps than the average market caps of the ones above. The owners of the above silver companies quite simply cannot all sell high and buy low. The smaller companies simply do not have the capacity to absorb that much buying power. Only a few can buy low and sell high. The masses, unfortunately, cannot do so. But physical silver can absorb the buying power, or at least, it should be able to. And if it cannot, then the exploding price of the physical silver market should continue to light a fire under all these silver stocks.CZN.TO / CZICF.PK
44 mil shares (fully diluted) 
@ Share Price $.62 CAN x .75 dollar/CZN = $.465 US
$20.5 mil MC
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 10 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.
$20.5 mil MC / 70 mil oz. = $.29/oz.  *** using this number***
Cost: 6% of an ounce, for 1 oz. in the ground.
The inverse: you get 16 ounces in the ground for 1 oz. silver.Additional comments: CZN exploded in price recently after a press release. 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 destroyed 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 get the mine running. They were 90% complete when bankruptcy hit. The value of those buildings is now $100 million, and the mine only needs about $20 million 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. The company can mine, at a profit, at current silver and zinc prices.
3. The company is named “Canadian Zinc” because at current prices, three times as much money is in the zinc. Therefore, a price per oz. of silver just does not do the price justice. The company can raise $20 million capital to start the mine, and mine at a profit today. Raising the $20 million, will be much easier as the investment markets for metals continues to improve. And remember, at $15/oz. for silver, half the money will come from silver. At $30/oz silver, 2/3rds will come from silver. 
4. The profit potential of 70 mil oz. of silver in zone 3 (of 12 zones), is over $3.00/oz. at today’s prices. Thus, the profit of the silver is about $240 million dollars. The market cap is $22 million, and they need to raise about $20 million more to finish off the mine and start mining.  Someone thought they could put a “per share profit” on this, but you can’t do that until you know how many shares the company will issue to raise the additional $20 million. 
5.  The 70 mil oz. of silver are not “silver equiv” oz.  They are all silver.  In addition to that, they have very high grades of zinc and lead (12.5% Zn, 11.4% Pb).  If I counted the zinc as silver, then the price of this company would be something like three times cheaper than it is.  If I counted the lead as silver, then this company would be about 4-5 times cheaper, like (4 cents/oz).  Although many people are saying there is a good upside potential to zinc because of supply demand problems, and that is certainly a positive factor to consider, there will ever be monetary demand for zinc, like there will be monetary demand for silver.  That’s why I don’t count the zinc and lead as silver. I own shares of CZN.TOTM.V / TUMIF.PK
10.5 fully dilutted shares
@ share price .87 CAN (x .75) = $.6525 US
$6.85 mil MC
20 mil oz resource up to 50 million oz. silver potential but needs to be explored and drilled. 
500,000 gold resource x 10 = 5 mil oz. silver equiv. 
$6.85 mil MC / 25 mil oz. = .27  ***I’m using this number***
$6.85 mil MC / 50 mil oz. = .13 Cost: 5.7% of an ounce, for 1 oz. in the ground.
The inverse: you get 17.5 ounces in the ground for 1 oz. silver.Additional comments: I don’t own any TM.V. I need to research more.SVL.V / STVZF.PK
17.8 mil shares 
@ 1.10 share CAN x (.75 US/CAN) = $.825 US
$14.7 mil MC
Indicated resources of silver 30 mil oz. (SOZ.)
*** discovery adds silver*** (perhaps 40-100 mil oz.) see below
new silver totals are projected to be: 70 – 130 mil oz.
$14.7 mil MC / 70 = $.21/oz.  ***I’m using this number***
Cost: 4.3% of an ounce, for 1 oz. in the ground.
The inverse: you get 23 ounces in the ground for 1 oz. silver.Additional comments: Now, whenever there is a range like that, it means those are ounces they need to drill to prove up.  And drilling costs money, but does not generate revenue like mining.  They are “exploring” those.  They are not like “inferred resources” ounces, which, although the least certain category, are more certain than this range number. There was a discovery that the company found and wrote and told me about, that they are now working on.  Plus, their reserves are potentially “open pitable” which reduces costs.Every silver company out there always has “more silver property” that potentially has “more silver in the ground” that they “need to explore”.  So every company has a “silver bonus” that’s not included in their oz. reserve figures.  But exploration is risky, and costly.  It’s why metals are precious.ADB.V
604 628 5642
Robert McIntosh
24.5 mil shares fully diluted (as of Sept., 2003)
@ share price $1.13 CAN x .75 = $.85 US
$ 20.8 mil MC
“An historical resource estimate based on underground sampling at Monte Del Favor is reported at 17 million tonnes grading 0.85 g/t gold and 224 g/t silver for a contained 123 million ounces of silver and 460,000 ounces of gold.” “While this resource estimate is not fully 43-101 compliant, the Company considers that it provides a conceptual indication of the potential of the property.”
$ 20.8 mil MC /  123 mil oz. = $.17/oz.
Cost: 3.5% of an ounce, for 1 oz. in the ground.
The inverse: you get 28 ounces in the ground for 1 oz. silver.I don’t own ADB.VCFTN.PK
50 mil shares fully diluted 
@ .35/share
$17.5 mil MC
100 mil oz. silver
+500,000 oz. gold x 10 = 5 mil oz. silver equiv.
$17.5 mil MC / 105 mil oz. = $.17/oz.
Cost: 3.4% of an ounce, for 1 oz. in the ground.
The inverse: you get 29 ounces in the ground for 1 oz. silver.Additional comments: For more info on what’s going on with Clifton, see www.dumontnickel.comI don’t own CFTN.PKMAI.V / MNEAF.OB
IR Tel: (604) 689-7017
37 mil shares outstanding on February 5, 2003
Share price $.32 CAN x .75 = $.24 US
$8.9 mil MC
company says “55 mil silver equiv. oz.”  –Note, I do NOT know what that means!  But I do know they are counting gold, or copper, or something, as silver.  How much is gold or copper, I don’t know.  But I do know this:  Gold is NOT silver.  And I calculate gold as silver, differently than others.  I use 10:1.  They might use 70:1.  So be careful, and do more research.  Nevertheless, I’ll use the number to see if it is in the ballpark.  (Got to start somewhere)
$8.9 mil MC / 55 mil = $.16/oz.
Cost: 3.3% of an ounce, for 1 oz. in the ground.
The inverse: you get 30 ounces in the ground for 1 oz. silver.Additional comments: I don’t know how much of the 55 mil oz. is gold, or copper or other minerals, which I value differently. Thus this is a minus, and the company should probably be valued as more expensive than the math is showing right now. See ECU below for more of what I mean.  The company might also be exploring, and if they find and prove up more silver, this will be a plus.I don’t own MAI.VECU.V 
77.1 M shares 
@ Share price .115 CAN (x.75 US/CAN) = .08625
$6.6 mil MC
Reserves and Resources: 41 mil oz. silver
Gold equivalents 712,000 x 10 (from the 70:1 silver/gold ratio) = 7.1 mil silver equiv… 
(new gold to silver value remember, see the top of this article) 41 mil oz. + 7 mil oz. = 48 mil oz.
$6.6 mil MC / 48 mil oz. silver equiv. = $.14/oz.
Cost: 2.8% of an ounce, for 1 oz. in the ground.
The inverse: you get 35 ounces in the ground for 1 oz. silver.Additional comments: Half the current value is in gold, not silver. If the gold was counted as 70:1, instead of 10:1, the “price” would be about 57% of the price now, or 43% off.I don’t own ECU. SRLM.PK
7 mil shares  
@ share price $4.53
$31.7 mil MC
~185 mil oz. reserves + resource, Sunshine alone
Quote from:
“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. “
~100 mil oz. other properties: the 10 sq. miles around the 1/2 sq mile of the Sunshine (rough guess–needs to be explored) *** I use this number*** even though–these extra 100 mil oz. are in the “explorer” category.  They need to be drilled and found, although I’ve heard of estimates as high as 400 mil oz. total for SRLM.PK
$31.7 mil MC / 285 mil oz. = $.11/oz.  
Cost: 2.3% of an ounce, for 1 oz. in the ground.
The inverse: you get 43 ounces in the ground for 1 oz. silver.Additional comments: Last week, I was using “260 mil oz.” as my main figure for Sterling.  And I had a 400 mil oz. as a “possilble, but annonymous source”.  This week, I wanted to get the most accurate figures.  The 260 was based on 160 for the Sunshine mine, plus 100 mil oz on other properties owned by Sterling.  But actually, the Sunshine has 185 mil oz., 25 mil in the reserves, and 160 mil oz in the resources category.  Together, that’s 185.  So, now, I’ll use “285” as a better estimate for Sterling.  I also found the url for the 185 mil oz. estimate for Sunshine.Sterling Mining acquired the Sunshine mine. Sunshine 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. I own a substantial share of SRLM.PK 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. 
4. The additional share offering, if it closes, could mean 8.5 mil shares, which would mean a market cap of $37 mil. That’s a minus.  $37 / 260 = .14/oz., which is a little higher price.  Beware of additional share issues causing shareholder dilution. I own shares of SRLM.PKFAN.TO / FRLLF.PK
Eric Birtch
(604) 684-6365
43.8 mil shares fully diluted (At Aug 31, 2003)
@ share price .315/share CAN x .75 = $.23625 US
$10.3 mil MC
Exploration and development in Mexico.
See also (Hunter-Dickinson) 
On 4 sulphide deposits out of 16, 29 mil ton grading 89 grams silver/t and 1.57 g gold/t.
Conversion: 89 grams x .0353 oz/gram = 3.14 oz.
RE: those 29 mil tons, they “anticipate increasing resources to 50 mil tonne range…”
3.14 oz. x 29 mil tons = 91 mil oz. silver
1.6 mil oz. gold x 10 = 16 mil oz “silver equiv”.
Total: 107 mil oz. silver equiv. 
$10.3 mil MC / 107 mil oz. silver equiv.  = .096/oz.
Cost: 2% of an ounce, for 1 oz. in the ground.
The inverse: you get 49 ounces in the ground for 1 oz. silver.Additional comments:  This stock was a $3/share stock in 1998, ten times the price today.  Look at the long term chart.  Talk about “Buying low!”Nothing done or drilled on the property since 1999.  Why not?  Because of low zinc prices: 46% of the price of the metals was in the zinc before prices crashed…  (This one reminds me of Canadian Zinc.  They think they are a zinc company.)  The largest componant today is gold, which was surprising to Eric, the IR guy I spoke with.  About 1/3 is in silver now.At today’s low metals prices:  
2% x 2000 lb = 40 lbs zinc x $.37/lb =  $14 for the zinc  (.37 to .50 lb zinc.)
3.14 oz. x $5.15 = $16 for the silver.
.055421 oz. x $385/oz. = $21 for the gold
(Assuming 100% metals recovery–which is not likely to be the case.  It may range from 60% to a higher percentage, depending on extraction methods used and the particular mineral targeted, which constantly change with technology advancements, and price changes in the metals.  By the time a mine like this gets running, perhaps in 5 years or so, things may change to allow even greater metal recovery.)So, per ton = $51.  Much less than CZN’s high grades.  However, when buying this company, we are paying about 30 cents/ton for the ownership rights to the ore.  Captialism at its finest.Get this:  By law (an insane law meant to protect investors, but actually hurts investors in my opinion) a company cannot do calculations such as these above to show the potential profitability of mining the minerals.  Why not?  Because when doing a feasibility study, they have to “be responsible” and use “average” prices of the metals and they are REQUIRED BY LAW TO ASSUME THAT PRICES OF THE METALS WILL ALSO GO DOWN!!!  Isn’t that insane?  This means that the law creates a virtual gag-order on companies from saying and defining how great their companies are to invest in, if you believe that inflation will hit and that precious metals prices will go up!  The company can say “Yes, our company represents a great inflation hedge,” but they cannot show you the math to define what “great” may mean given various higher metals prices!!!So, no wonder information on mining companies, and potential at different metals prices is so difficult to find.  It’s like pulling teeth to get the answer to the question: “What percentage of the profits of the mine will come from zinc, and what percent come from silver &/or copper or gold, etc.”  It’s almost illegal for them to give such information to you based on current prices or possible higher prices!  But it’s not illegal for me to do math and show you, nor is it illegal for you to calculate whatever you want in your spare time.The biggest potential here, I think, is not only the low overall cost of these reserves, but also that they may have up to 4 times the silver as calculated above, which is on 4 deposits out of 16. I bought shares of FAN.TO last week.MNMM.OB 
7.5 mil shares 
@ share price $3.20
$24 mil MC 
261 mil oz. silver resources.  These have been very well proved up by previous drilling.  Previous drilling spent over $100 million drilling the property.  This is a much higher class of certainty of “oz. in the ground” than in the explorer or hopeful category which always is expressed as a range.  
$24 mil MC  / 261 mil = $.09/oz.
Cost: 1.9% of an ounce, for 1 oz. in the ground.
The inverse: you get 52 ounces in the ground for 1 oz. silver.Additional comments: Mines Management owned 10% of the rights to their property in Montana. The other 90% owner simply gave up on the property and walked away from their mining claim due to “perpetually” low silver prices and environmental 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 1/2 the value (at current prices) in copper, 2 Billion pounds of copper, and 261 mil oz. of silver.  Do the math, people. 261 mil oz. silver x $5.25/oz. = $1.3 Billion. 2 Billion lbs copper x .85/lb. = $1.7 Billion. Amazing assets in the ground for such a small market cap. Three Billion in asset value / 30 million in market cap, means you are paying 1/100th the price.  Surely, the profit will be greater than 1% of the asset value, over the life of the mine.They do not have an active working mine–Which is a minus.  They will need to raise capital to get a mine going. And there are environmental concerns.  I think that environmental concerns will go away when the dollar crashes, and jobs and silver are needed.  In the meantime, the silver is safe.I own shares of MNMM.OBASM.V / ASGMF.PK
604 682-3701
David Wolfin
6.9 mil shares
@ share price .81 CAN x .75 = .60 US
$4.2 mil MC
“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.” 
–focus is on being silver company. A plus.
= 28 + 50 + 27 = 105
Avino owns 49% of that, or 51.5 mil oz.
$4.2 mil MC / 51.5 mil oz. = $.08/oz.
Cost: 1.6% of an ounce, for 1 oz. in the ground.
The inverse: you get 59 ounces in the ground for 1 oz. silver.Additional notes: 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 2001. So there is in place an existing mine, with working infrastructure, which is a bonus.  Nevertheless, they can always add to reserves as they continue to explore their property, and as the price of silver moves up, the reserves picture will grow larger. I bought shares of ASM.V recently.
Explorers deserve their own category, since they cannot be valued by my method of looking at reserves and resources of ounces of silver in the ground.  We do not know how many oz. they might have. They are exploring for that. But, given their market caps, and given what I feel is a good price for a silver company of about 30 cents per oz. in the ground, I can calculate how much silver they had better find, in order to justify their current stock price. This valuation method might also help those who have a better feel for how much silver they might find than I do, to value the company. This list, although at the bottom, in no way indicates that these companies are more highly valued than companies listed above. It is also difficult to categorize a company as an explorer, since all silver companies always hold more silver properties that need to be explored.(The order is by largest market cap first, not by “comparative value”.)IMR.V / IMXPF.OB
43.4 mil Fully Diluted shares 
@ share price $2.14 CAN x .75 = $1.60  U.S
$69 mil MC / (.30/oz. “Arbitrary Jason Hommel good value” factor) = 231 mil oz. that they had better find to justify the current Market cap. Additional comments:  This explorer has found bonanza high grades, which many consider to be an outstanding benefit, and they are willing to pay much more for such high grades, which have a much higher chance of being able to be mined at a profit in today’s environment of low silver prices.  Some people say the high grades are far more important than how many ounces are found, and they more highly value this factor than my arbitrary “good value” number of 30 cents/oz.  In other words, they might be willing to pay up to 50 cents or a dollar for such high grades.MCAJF.PK
376 mil shares
share price .13 
$49 mil MC
“Total Inferred Resource is 34.5 million ozs silver but the district is unexplored for epithermal silver and exploration to date suggests a district potential of 50 to 100m ozs Ag or perhaps much more.” –“Macmin is a silver focussed company” The Texas Silver Project has in-ground resources of 44.5Moz of silver equivalent
$49 mil MC / 50 mil oz. = $.82oz.
$49 mil MC / 100 mil oz. = $.41oz.
$49 mil MC / (.30/oz. “Arbitrary Jason Hommel good value” factor) = 163 mil oz. that they had better find to justify the current Market cap.CDU.V / CUEAF.PK 
28.3 million shares fully diluted (assuming all the options and warrants are exercised, which are NOT all “in the money”) 
@ share price 1.63 CAN (x .75 US/CAN) = 1.22
$34.6 mil MC
Proven & Probable: NONE! (explorer).
Speculated reserves ~ 100 – 250 or more mil oz.?????
$34.6 mil MC / (.30/oz. “Arbitrary Jason Hommel good value” factor) = 115 mil oz. that they had better find to justify the current Market cap.Additional comments: *** I wrote an article on Cardero in January, 2003. 
See Their first drilling results came back less than expected, and the stock took over a 50% drop. Part of the problem was the type of drilling. The geologist said the water from the drill was washing away too much of the silver in the sample. And so, the stock has climbed back substantially with better drilling results since then.Cardero is in Argentina. They are trying to prove up the property to see if they can make a huge open pit operation out of it. And they have lots of property in the area, and the area may have several large silver deposits that need proving up.This one also has potentially high grades that can be mined at a profit today.  Their property was an active mine, but only a few tons/day.  But they hope to make an open pit project out of the main deposit.I own shares of CDU.VMAG.V
28 mil fully diluted shares
@ share price $1.39 CAN x .75 = $1.04 US
$29 mil MC / (.30/oz. “good value” factor) = 97 mil oz. that they had better find to justify the current Market /
Dianne (IR) Phone: (403) 265-4356
257.1 Million shares fully diluted
@ share price $.08 CAN x .75 = $.06 US
$15.4 mil MC
From p. 1 of 2nd qtr 2003 report: “The company has a policy of not hedging or entering into forward sales contracts.”
Cash flow positive. !!!  
14 projects in the Philippines.
Producing a dore bar of 96% silver and 4% gold from Canatuan project with the following:
827,000 tonnes 3.98 (au)g/t 141.1(Ag)g/t = .14oz/t gold + 4.98oz./t silver
1,497,000 tonnes 1.26 (au)g/t 58.4(Ag)g/t = .044oz/t gold + 2 oz./t silver
= 115,780 oz. gold + 4,120,000 oz. silver
= 66,000 oz. gold + 3,000,000 oz. silver
Total silver = 7.1 mil oz silver
Total gold = 182,000 oz. gold x 10 (@10:1) = 1.8 mil oz silver equiv.
Total silver equiv (Canatuan) = 8.9 mil oz.
+ 2.5 % royalty on “Rapu Rapu” that should be worth about $1 million per year starting within 9-12 months.  (a cash source for an explorer is a big plus)
+ they own a drilling company with 20 rigs.
+ they have a “foot in the door” in China.
+ many other promising exploration properties in the Asian Pacific.
$15.4 mil MC (.30/oz. “good value” factor) = 51 mil oz. that they had better find to justify the current Market cap.Additional comments:  This one looks interesting, but there is just too much unknown for me at this point for me to be able to quantify.  They are an explorer, listed in terms of market cap size.EPZ.V / ESPZF.PK
Esperanza Silver Corp
fully diluted 20 million shares
@ share price 
$1.04 CAN x .75 = $.78 US
$15.6 mil MC / (.30/oz. “good value” factor) = 52 mil oz. that they had better find to justify the current Market cap.  “Esperanza Silver Corporation is solely dedicated to the identification, acquisition and exploration of new silver projects.” Additional notes:  Please note this number is totally arbitrary.  Just like number of shares is an arbitrary number, and share price is an arbitrary number.  You need to have something to correlate it with in order to make sense.  I have no idea whether this company is a good value or not.  I have no way to know, or tell without calling the company and getting a feel for what they are doing.  I have not done that yet.  Sometimes, people say you should judge a company by the management, and whether they were successful in the past.  But mining is still risky.IAU.V / ITDXF.PK
(416) 368-4525
30 mil shares
@ share price $.59 CAN x .75 = .44 US 
$13.3 mil MC
Company’s exposure is about half to gold, half to silver in several projects.
Joint Venture with BHP Billiton focused on “Cannington” style silver deposits using proprietary BHP Billiton data.
(all figures are “exploration potential”)
El Salvador – 38.5 mil oz.
Argentina – 6 mil oz. 
Total: 44 mil oz. silver
Total gold: ~690k oz.  x 10 (10:1 ratio) = ~ 6.9 mil oz. “silver equiv”
Total: 53 mil oz. “silver equiv”. (exploration potential, indicated or inferred, not reserves)
$13.3 mil MC / 50.9 mil oz. = $.26/oz.Hopefully, you get 18  ounces in the ground for 1 oz. silver.Additional comments:  This explorer/developer tends to focus on good grade, mineable deposits, and form partnerships with other companies to access great information, and expects to produce silver & gold within 2 years, by 2005.  They also took the time to contact me, after having seen this silver report. Since this company is about half gold and half silver, the 10:1 ratio really cuts down the “silver equiv” numbers, and creates a higher price.  But it’s like that with a lot of the companies on this list, so keep that in mind, and do your own math if you want to use the 70:1 ratio.NPG.V / NVPGF.PK
33 mil shares fully diluted
@ share price .61 CAN x .75 = .46 US
$15 mil MC
Amador Canyon Silver Project: 50-250 mil tonnes
silver grades average 4 oz. sil/ ton in the deposit
= 200 to 1000 mil oz. silver????? –very speculative at this point. Drilling needs to be done, scheduled $13.2 mil MC / (.30/oz. “good value” factor) = 44 mil oz. is all they need to find to justify the current Market cap.
$15 mil MC / 200 mil oz. = $.075/oz.
$15 mil MC / 1000 mil oz. = $.015/oz.
At $.06/oz.,
The inverse: you “might” get 68 ounces in the ground for 1 oz. silver. 
At $.012/oz.,
The inverse: you “might” get 338 ounces in the ground for 1 oz. silver.NPG.V Notes: Explorer in Nevada. They do not really know how much silver they might they have in the Amador Canyon project. They are doing drilling this fall, 2003, as they just did a $2.5 million private placement. The Chariman, David Hottman, says that 90% of the value of the company is in gold, NOT silver, and yet, I’m buying this company for the silver value only, and as if the gold componant was worth nothing. (The gold projects are a free bonus, in my book, and help to alleviate the risk of this explorer.) He has 10 gold projects, and one silver-but it may be big. On the website, for David Hottman’s bio, it says he was a founding member of Eldorado gold. “During his tenure, Eldorado’s market capitalization grew from Cdn $7 million in 1992 to a peak of Cdn $781 million in 1996.”  Please note, exploration is risky, and costly.  
I own shares of NPG.V NJMC.OB
15.7 mil shares
@share price $.56 US
$8.8 mil MC / .30 “good value factor” = 29 mil oz. they need to find to justify a value price.
 New Jersey Mining Company (NJMC) is engaged in exploring for and developing gold, silver and base metal ore reserves in the Coeur d’Alene Mining District of northern Idaho also known as the Silver Valley – one of the world’s richest silver districts.MMG.V / MMEEF.OB
25.6 mil shares outstanding (3q 2003 report June, 2003)
@ share price $.45 CAN x .75 = $.34
$8.7 mil MC /.30 “good value factor” = 29 mil oz. they need to find to justify a value price.
@ share price .225 x .75 = $.169
28.3 mil shares
$4.77 mil market cap /.30/oz. “good value factor” = 15.9 mil oz. they need to find to justify a value price.
Silver Explorer in Mexico in the the Sierra Madre mountains: Uruachic.
*** Doing active drilling.SPM.V
7.4 mil shares issued
@ share price .80 CAN x .75 = $.60 US
$4.44 mil MC /.30/oz. “good value factor” = 14.8 mil oz. they need to find to justify a value price.
Explorer: property next to IMR.V in Argentina, another explorerSHSH.PK
12 mil shares
$3.6 mil MC /.30/oz. “good value factor” = 12 mil oz. they need to find to justify a value price.
In Cour d’Alene, near CDE, HL, & SRLM.PKROK.V
14.3 mil fully diluted (July 15, 2003)
@ share price .30 CAN x .75 = .225
$3.2 mil MC /.30/oz. “good value factor” = 11 mil oz. they need to find to justify a value price.
$12.95 mil MC
“Itronics Inc. is the world’s only fully integrated photochemical recycling company. It provides photochemical waste collection services, recovers and refines silver from the photochemicals,”
Additional comments:  Itronics is not an explorer, and not a miner, and has no reserves.  As such, it is extremely difficult for me to value this compared to other silver stocks. Final Category: Silver stocks FOR YOU and I TO RESEARCH:  RRM.V FNC.V KBR.V VGZ IPOAF.PK EZM.V PMU QTA.V MAR.AX  HDA.V SLSR.PK SDSI.PK HRNS.PK HOGOF.PK aqi.vReports such as this usually cost an annual subscription such as $100 – $300 or so.Articles like this one, that present opportunities as good as these, can tend to move the markets in these stocks. So, be careful when buying. If you place any market orders at the open for any of these small stocks, you might end up buying at prices that are significantly higher than you intended.  Limit orders might be better, but then, you run the risk of your order not being filled if the stock price exceeds your limit.  And bid / ask spreads such as 15% on small cap silver stocks are not unusual.  Markets can especially be moved given the wide readership of I’ve seen markets moved even by small private newsletters such as and, which reach much smaller numbers of people than Some of these stocks can move up 15%, 30%, 50% or even over 100% in a single day. Thus, valuations can change very, very quickly. So, be careful, and re-check the numbers if the prices move up. Do your own math.Also note, the majority of these companies have an emphasis on silver only.  Most silver is produced as a by product of other mining, like lead or zinc or copper mining.  Those companies that primarily produce other minerals are not featured in this report.  This also helps to explain and prove, that silver is undervalued.  If silver miners cannot mine silver profitably, and this report shows that to be true, then something is wrong with the silver price.  It must go higher.One more cautionary note. This is NOT an exhaustive list of all the silver company opportunities in the world. There are others. I’m lazy. I have not scoured the earth for everything available. I know this list is incomplete. And this brings me to why I’m sharing this information with all of you for free.So, why am I writing up this information for free, and not trying to charge money for this information? As I said, I own what I consider to be some of the best of these stocks, based on my method of valuing silver stocks. If people buy them, and the stocks go up, I will profit.The final and main reason why I’m writing this is that I expect that if people know of better silver property opportunities, they will contact me. So if you know of silver properties that are cheaper, please contact me. Please try to include the same type of information I need for this list such as: outstanding shares, share price, market cap, and silver reserves & resources.One more reason to buy silver and gold:  Diamonds will no longer be a store of wealth!
“…inexpensive, mass-produced gems, two startups are launching an assault on the De Beers cartel.”  …”these stones will bankrupt the industry.”If you own diamonds, recognize they are an overvalued asset due to the De Beers cartel, and were worth perhaps 10 times their real value.  Now that diamonds can be machine made, the value of a diamond will probably collapse by a factor of 100.  Meanwhile, the value of silver will go up perhaps by a factor of 100!
More Information Sources on Silver:Book recommendations:”Silver Bulls” by Paul Sarnoff. Details the 1980 rise and fall of silver. Written in 1980.”Silver Bonanza” by James Blanchard. 1993. Outlines the case for silver.”The definitive guide to North American mining stocks” by Doug Casey & Jerry Pogue available thru & Jerry Pogue is a director of Mines Management. Doug Casey has been #1 booster of mining shares since 1978 publication of “Crisis Investing ” and 1982 “Strategic Investing” and 1992 “Crisis Investing for 90’s”The three best sources for commentaries on the silver market that I’ve found on the internet today are David Morgan, Ted Butler, and a report by “Kazvestor”.  I subscribe to, and read, David Morgan’s newsletter, and I recommend it.I appreciate David’s comments.  But my report did not always “leave out the economics of a mining project.” I included this information for a number of companies when I could find the information.  For other explorers with deposits that are not currently economically viable, it is impossible to obtain such information, because there is no need to produce a feasibility study at the moment.    But this does not mean that one day in the future, at much higher silver prices, that a project will not be wildly profitable, especially given the incredible buying opportunity that exists today as a result of the 23-year bear market in silver.  Further, David commented about grades.  I addressed this issue at the top of this report.  In the future, I will try to add the average grades of the silver, where data is available, and in a number of places, I have already done so.The data in this report will continue to become more and more accurate each week.  Believe me, if this report is long to read, it certainly takes a lot more time to compile. I invite the silver mining companies to email me to help me update my information on their companies, especially as they update their figures, and several already have begun to contact me.
Some of the reserves and resources listed for the above companies, especially the juniors, may have been drilled out and calculated based on old regulations, before the new 43101 compliance rules were put into effect.  (Not all are 43101 compliant reserves & resources.)I received hundreds of wonderfully supportive letters.  Here’s two I’d like to share:  One positive, the other negative.Thanks Jason for your very good reports.  
I have been using your method for about two years and it really works.  
I have been educating my friends to the method and it is starting to snowball.
My friends have been making tons of money and they think I am a genius.  
There is nothing better than happy PM investors.  
Again, keep up the good work.  
Your output is much more useful than the garbage coming out of the mouths of so called “experts”  “you da man” –Paul VaillancourtI thanked Paul for a wonderful testimonial, and I asked his permission to publish his letter.  Here’s the negative letter: 
I strongly resent your articles on silver that have come out in the past week.  You show your comparative of your recommended silver stocks against the 5 or 6 that you have bashed, and is it any wonder that yours have performed better?  Obviously your article had a major impact on a number of misinformed investors, but time will tell if you are right or wrong.  Pumping up your stocks (so you could probably take some profits and get out) is nothing more than “pump and dump”, and the companies you mention, in general don’t even shine a light on the ones that you “pan”.  Why don’t you be fair and save my e-mail and publish it in the future, as I am willing to bet you that either PAAS, SSRI, WHT, or even CDE post far greater profits than any of the stocks that you have recommended once silver surpasses $6.00 per ounce.
I also bet SRLM is your typical pump and dump stock, as it will probably cost them in excess of 20 million dollars just to clear out their flooded Sunshine mine that they have purchased, even before spending any money to resurrect the mine.  
Martin Wetter
Private silver Investor
My reply to  Martin:
I have not sold any of my silver stocks since I started writing.  If I do sell, I intend to write about it, and why.  Now, if you really believe that you are a better informed investor than I am, then you should take advantage of what happened last week, and buy HL & CDE on the dips during the next week.  Will you be so bold as to put your money where your mouth is, and do that, and write me about it?  You are also free to write an article on silver stocks and send it in to –JasonMarty replied:
Thanks for the reply.  First, you can absolutely publish my response, and secondly, on Friday Sept. 26th I already took the privilige to buy SSRI between $6.58 and $6.65. Yes, I might be a little early buying it back, but I’ll take that chance. Regards, MartyMy final comments:  To Marty’s credit, he did buy the cheapest silver stock among the relatively expensive ones.   I don’t issue buy or sell recommendations, I just compile a list, and SSRI was not the most expensive on the list, not at all, and I certainly didn’t “bash” it.  SSRI is not really that pricey, nor that cheap at current prices, but it is toward the cheap side.  They do have a lot of properties, so they are well diversified, and they know the silver story, and are aggressively acquiring properties, and they continue to prove up more and more reserves and resources on their own properties, which is another plus. I wonder, though, about Marty’s many accusations that he did not back up with any facts.  Such as I’m engaging in “pump and dump”, or that I’m impacting “misinformed investors”.   I agree I’m impacting “less well informed” investors before I came along and provided so much information.  And I resent the implication that I’m somehow the one doing the misinforming.  If Marty is accusing me of lying, I wonder why he never says what the lies are, or corrects any information.  Although Marty dares me to engage in betting, I don’t gamble.  I don’t like taking money away from others.  I simply invest, and buy what others are willing to offer.For information from the SEC on how to protect yourself from a “pump & dump” scam, see the following:Pump and Dump Schemes
Pump&Dump.con: Tips for Avoiding Stock Scams on the Internet
Microcap Stock: A Guide for Investors
Internet Fraud: How to Avoid Internet Investment Scams
Tips for Checking Out Newsletters Hommel
Jasonhommel@yahoo.comThe Silver Stock ReportFinal Disclaimer:  I have not received any compensation from any company for writing up my weekly report on “Silver Stocks–Comparative Valuations,” neither cash, nor shares, nor options, nor any other sort of compensation. Within the report, I declared my ownership of each company that I own. To repeat, I own shares of the following: MNMM.OB, SRLM.PK, CZN.TO, CDU.V, NPG.V, ASM.V, and FAN.TO.  I am not short any companies, and I hold no short positions, no puts, no did not receive compensation by any companies for this report and does hold a position in Silver Standard at the time of publication.
— Posted Sunday, October 5 2003