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To: ms.smartest.person who wrote (1939)	1/2/2007 11:39:02 PM
From: ms.smartest.person	Read Replies (2) \| Respond to of 3198

&#8362 David Pescod's Late Edition January 2, 2007 SHEAR MINERALS (V-SRM) $1.30 +0.26 SILVERCREST MINES (V-SVL) $1.45 +0.17 “It was vacation last week and silly us we didn't print this piece by Eric Coffin of the Hard Rock Analyst. Obviously we should have and more than ever it is worth a read! We wrote this on December 27,2006 when Silver-Crest was $1.16 and Shear Minerals was $0.77.” It’s that time of year where we go to some of our best stock pickers of the past year, or for that matter, the last several years for their picks for the coming year. We ask the question, “If you could only buy one stock, what would it be?” We’ve got more than a few that have found more than one girl that catches their eye. We start with Eric Coffin and instead of us editing things and putting in interview comments, why don’t we just write exactly what he wrote for us. I hope you find it interesting…and please note that neither of these plays, Shear Minerals, a diamond play in the Canadian Arctic and SilverCrest, a silver play in Mexico are uranium plays. We wonder right about now, if uranium just hasn’t gotten way ahead of itself. Anyway, here’s Eric Coffin: Ok, as I was saying. I'll pick two, just to be obstinate, since you know how much I hate the “if you could only buy one today” question. Both are stories of perseverance and proof that good technical work can yield discoveries even when the first set of results isn’t spectacular. That’s an important lesson for resource stock traders since “overnight successes” actually rarely happen as quickly as traders think. The first one is a home grown story from you chilly Edmontonians. Shear Minerals has been exploring for diamonds in Nunavut for several years. It had a big run in price in 2003 when it first drilled at its Churchill projects and intersected a large number of kimberlites. HRA took some profit on its initial $0.30 buy at that point when it ran past $1.50. Although SRM was very successful at hitting kimberlite on its first program it wasn’t so lucky at finding diamondiferous kimberlite. It’s taken three years of further sampling and refinement of its geophysical work to crack the code at Churchill but it appears they may have done it. This year SRM reported very good counts from small samples from a number of dykes. The larger dykes, Kahuna and Notch, could be large enough to produce from especially Kahuna which is 3.5-4 metres wide. Larger samples are in the lab. SRM has had a strong bounce from $0.40 to $0.70 on good volume based on the initial counts. 20 tonnes of kimberlite are being processed now and equally good counts from these samples could move SRM higher since they will be big enough to get a preliminary grade estimate. Those results should be out in mid-late Q1. Although Kahuna is a dyke, its got good width and better logistics than, say, Winspear’s dyke that DeBeers is putting in production. Equally important, there are still 17 unresolved mineral trains that have very strong indicator mineral geochemistry. We consider the probability of another discovery or discovery of thicker zones or blows in the existing dykes to be high. We add our standard caveat about trading diamond stocks – buy them between, not right after good news releases. Diamond exploration has long time lags and its best to accumulate during periods of slow news flow. That said, the fact that SRM is holding a pretty large one day gain is evidence that there are others who take these results seriously. The Churchill project is a JV between Shear (51%) BHP-Billiton (15%) and Stornoway (35%). Good results will be good for Stornoway too, but Shear has much higher leverage to the project and will have bigger gains with success. The second company, SilverCrest (SVL-V) has projects with resources in place in Honduras and Mexico. They recently reported decent metallurgical results fro their El Zapote project in Honduras but we consider the Mexican projects, Santa Elena and Cruz de Mayo to be much more important. SVL reported an initial resource calculation at Santa Elena of 14.5 million indicated and 18.4 million inferred silver equivalent ounces. The grades at Santa Elena are gold rich and gold is actually about 60% of the “silver equivalent” resource at current prices. That’s not a bad thing since SVL ultimately plans a heap leach operation at Elena and gold tends to have higher and more consistent recoveries in a heap leach scenario. Santa Elena looks like its close to if not above the size threshold for production and additional ounces at current or better grades should push it forward. A big recent change for SVL was the recognition that some of the silver at its other advanced Mexican project, Cruz de Mayo, was in mineral forms (silver halides, probably) that don't respond well to standard assay techniques. A set of representative samples was rerun using "4 acid" digestion and the grades at Cruz increased from 19% to over 200% over the ICP results. We saw a similar thing happen at Minefinder's Dolores deposit where 4-acid results lifted the overall silver grade by 36% and Minerfinders concluded from its metallurgical work that the higher grades are a better representation of actual recoverable metal at Dolores. The problems at Cruz may have been compounded by poor core recovery. The rest of the core from SVL's phase I program is being reanalyzed and should be reported in January. SVL has also chosen a number of samples from the nearby Silver Angel project to run 4 acid digestion on. Drilling there reported some long intervals with disappointing grades but that project might come back to life if it turns out to have had the same assay problems. We expect to see another drill phase at Cruz based on this new information, RC drilling this time and probably starting in January. SVL is sourcing a core rig for Santa Elena and will start another program there as soon as it gets one. The importance of the higher assays at Cruz is that they not only improve the average grade but they indicate that some of SVL's holes outside the historical resource are actually economic and have larger intervals than before. Cruz de Mayo had an historical indicated resource of about 10 million ounces that SVL is hoping to double with the next drill phase. The two Mexican projects together have a serious potential to lift the overall (indicated and inferred) silver resource for SVL ( from Mexico alone) to the 75-100 million ounce equivalent level. Based on valuations silver explorers are receiving SVL would trade much higher than its current range if this happens since it currently gets about half the valuation per ounce as its peer group. There should be lots of reassay results in January and drill results from one or both advanced projects through mid year. 2007 could see a production decision at Santa Elana which will also help the stock. SVL recently financed at $0.95 and shouldn't need to sell stock again any time soon.