Here's an article I just found on MMGG from 9/23/05:
silverinscripture.com
Zinc 101
The Future of Metalline Mining Company
David Zurbuchen
This report will explain that by as early as 2009, Metalline Mining Company could yield an
annual profit in excess of 1 billion dollars. This translates into a share price between $10-100, ten
to one-hundred times higher than it trades at today. This potential may seem unreal, but it has
happened many times before. Take TASR for example, a stock which rose from $.31 to over
$32/share in only 2 years!
Here is the one year chart of Metalline Mining Company, symbol MMGG.OB:
If you have just discovered Metalline Mining, the chart looks promising. Why? For one thing, a
long consolidation period between Nov.04-Sep.05 has and is setting the stage for a huge
reversal. The volume level was extremely low in July, when the stock was also bottoming out, and
it looks as if the volume is soon to pick up again. Here is the expanded chart beginning in Jan 01:
I don't think any drop below the one dollar level can be long sustained. There is strong
technical/psychological support there as that was the price many insiders paid for their shares.
Since it isn't likely than insiders will be excited about selling their shares at a loss, I don't anticipate
much downside risk from here on out.
One of the main reasons for the low volume, is the low volume. Such a situation has causes
stocks like this to trade with a very large bid/ask spreads, sometimes as much as a $.15 cent
difference! This means that if you want to sell in a hurry, you're looking at a 15% loss. As
unsavory as it is to watch for those who hold on through the decline, it is that much greater for
those who are patient enough to wait it out or are lucky enough to get involved at the end of the
slump. This is due to the to the fact that in such a consolidation phase, shares tend to move into
stronger and stronger hands, as day-traders and short-term speculators avoid the stock like the
plague because of the large spread. These reasons alone ought to be enough to pique the
interest of the sidelined investor who is interested in tremendous long term potential.
But after all, chart reading should never determine an investment. What ought to determine an
investment is real value. The trick is figuring out how accurately the current share price reflects
that value and then investing accordingly. I'm sure you remember learning in physics how 'fluids
seek out their true level'. The same general rule applies to investments, so let's seek out that
level for Metalline Mining Company using all the information available.
Shares Outstanding: 19.93M
Market Capitalization: 19.93M at $1/sh.
Outstanding Debt: 13.68k
Total Cash on Hand: 590.21k
Before going any further, it is necessary to briefly outline the history of the company, in order to
understand certain value calculations, and some of the risks involved.
Metalline Mining is still in the exploration stage, though they are well on their way towards the
completion of their feasibility study. Once the study is completed, construction of the mine can
begin which will one day be able to exploit the prolific silver, zinc, copper, and lead deposits in the
district of Sierra Mojada pictured below. Located in the state of Coahuila, Mexico it consists of
concessions that total 7108 hectares (17,563 acres).
Since the turn of the 20th century, large amounts of high grade copper and oxide zinc
mineralizations have been discovered. Such high grade deposits, in fact, that in the history of the
district there has never been the need for a mill to concentrate lower grade mineralizations! In
other words, this is some 'rich' property.
Since acquiring concessions in 1997, Metalline Mining has conducted extensive exploratory
survey and drilling programs.
The most recent drilling program which began in January of 2004, has since been evaluated by
Reserva International. The results showed that using a 5% cut off grade (using grades greater
than 5%) and with blocks of 5 meter dimensions, there would be an "estimated 17,926,988 metric
tons with a grade of 8.78% zinc for the Iron Oxide Manto and 5,431,050 metric tons with a grade
of 12.08% zinc for the Smithsonite Manto".
Based upon these results, Metalline has since commissioned a feasibility study through Green
Team International. The expected is cost is $5 million. GTI was chosen partially due to their
experience conducting the feasibility study on the Skorpion mine, which is currently the only mine
in the world extracting Super High Grade zinc (99.995% zinc) from zinc ore using the solvent
extraction electrowinning process. This process, also to be used by Metalline, allows for a 30%
lower cost/pound of extracted zinc than when using the usual pyrometallurgical process ($.25 vs.
$.35). The Company anticipates that by using this newly discovered technique, that Metalline has
the potential of becoming a world premier zinc mine. In fact, the president of Metalline made the
statement that if electrowinning is capable of being used in the Sierra Mojada district, then
Metalline could become “one of the largest zinc mines and one of the lowest cost producers in the
[worldwide] zinc industry.”
Using the results of the study begun in January 2004 (remember, this is deals only with the
oxide zinc mineralizations), there are about 18M metric tons of 8.78% zinc and about 5.5M metric
tons of 12.08% zinc.
.0878 (grade %) x 18M (# of metric tons)=1,580,400 metric tons of zinc and
.1208% x 5.5M metric tons = 664,000 metric tons of zinc.
Together the total sums up to 2,244,800 tons of zinc in the 2 explored areas of Sierra Mojada.
With the estimated production cost of $.25/lb zinc and the current market price of $.64/lb,
Metalline would command a profit margin of $.39/ton.
The mining infrastructure Metalline plans on building within the next 2-4 years, would extract
180,000 metric tons of zinc metal annually.
One metric ton is equal to 2,204.622 lbs., therefore, this equates to the production of
396,831,960 lbs. Zinc annually.
Multiplying this number by the profit margin of $.39, yields the staggering amount of
$154,764,464.40 profit per year.
Dividing 2,244,800 (the total amount of zinc in Sierra Mojada) by the amount of zinc annually
extracted gives more than a 12 year lifespan for the mine.
At the current market capitalization of about 20M, and with a conservative P/E ratio of 10, we
find that $154,764,464.40 x 10= $1,547,644,644. This is the potential future market capitalization
of Metalline Mining Co.
Such a Market Cap would dictate a price/share of $77!
Even if the stock to be diluted beyond the level currently allowable, and 80M more shares were
issued in order to raise the costs associated with building the mining infrastructure ($250M), this
would still yield a price of about $15/share. Indeed, even if the stock were diluted to 300M
outstanding shares (something extremely unlikely), the price should settle around $5/share.
None of these calculations even begin to consider the large high grade silver and copper
deposits present within the district. Also, these evaluations only account for the 1st year of
production, meaning the share price should continue to rise significantly ever year thereafter.
Finally, Metalline Mining is of the opinion that there is exploration potential beyond what has
thus far been discovered in the Sierra Mojada Project, meaning that the growth of the company's
assets would continue even while the mine was in operation.
The use of zinc is widespread, and its demand has increased significantly over the past 30
years. A steady 4% annual increase in consumption has replaced the historic norm of 2%. As
countries like China and India continue to expand, creating huge new demand for raw materials,
the price of zinc is likely to continue climbing. The 5 year price of zinc can be found here, showing
the price to have nearly doubled since January of 2003.
kitcometals.com.
Yet, even after this doubling, it is still only 4 cents above the average zinc price for the past 40
years, a price which has moved as high as $1.70, a level which might soon be approached once
again. 40 year Zinc Chart
One of Zinc's primary uses is in the galvanizing of steel, and in smaller amounts, brass, and
zinc alloys. The largest markets for galvanized steel are the housing and automobile industries.
As the commercial and residential construction sector continues growing at an ever greater rate
due to modernization of peoples all over the world, the increasing demand for zinc is a matter of
fact. Zinc is found in microwave and cellular towers, steel beams, studs, floor joints, trusses, and
galvanized electric circuits. Die cast zinc parts are found in automobiles, computers, tools and all
types of appliances. As an alloy of lead, copper, tin, lead, aluminum, or magnesium, zinc also
plays a role in the electrical and consumer product industries. But that's not all folks, zinc is also
used in manufacturing of batteries, rubber goods, cosmetics, chemicals, and pharmaceuticals.
Furthermore, since zinc is an essential nutrient for all living things, and is often used accordingly
in vitamin supplements, animal feed, and fertilizers.
But what would all this demand mean for the future of Metalline Mining if it weren't for the lack
of supply? 14 year Zinc Inventory Levels
CRU International has recently forecast that 2.5 million tons of new annual zinc mine
production must be attained by the year 2007 in order to fill in the supply/demand gap. Because
few of the large zinc mines are at this moment committed to production due to the low market price
of zinc, it is highly unlikely that this demand will be met in time.
Higher zinc prices are first required in order for the companies with potential zinc deposits to
finance their development process. Only a substantial increase of price will motivate the mines to
begin production, and such a rise seems inevitable as the zinc demand continues to out-pace the
current producers abilities.
Indeed, the LME zinc inventory is currently about 540,000 tons, down about 250,000 tons
since its peak in April of 2004. If inventory levels continue to decline, the price must increase to
curb the excess demand. The chart of LME warehouse levels for zinc can be found here:
kitcometals.com
Do to this outstanding technical data, it may happen that before Metalline Mining Company
ever begins building their mine, or perhaps while in the midst of it, that they will be sought out and
bought out by a large mining company desiring to expand it's own capacity. In such a case, it can
only be speculated what the share price offered would be. But based upon the earlier value
calculations, a conservative estimate would lie between $5-15 a share.
But zinc aside, there is also a very lucrative *Silver Bonus:
*By 1999, Metalline Mining had collected over 5000 samples of the polymetallic mineralization
north of the Sierra Mojada Fault in the Polymetallic Manto region. On average these samples
contained 300 grams of silver per metric ton (10 ounces silver per metric ton), 0.6% copper, 5.5%
zinc and 2.2% lead. Some such samples, however, showed levels as high as 341 ounces of silver
per tonne! Copper grades also ranged as high as 4%. These results indicate that the
Polymetallic Manto is full of high grade copper and silver deposits.
In the end, only time will tell whether in 3-4 years Metalline Mines stock price will have
ascended beyond $10/share, or have long since been bought out for a similar price. Wisdom is
indeed proved right by her children, and the Metalline management team has done an
outstanding job of putting things in order. The right place at the right time. Remember,
"Opportunities always look bigger going than coming."
For more information about Metalline Mining, just visit the company's web site at
metalin.com, or contact Merlin Bingham, CEO of Metalline Mining, at 208-665-2002 or
metalin@adelphia.net |
