New Investment Idea - Minco Silver (msv.to)
We are taking an initial position in very exciting Minco Silver (msv.to). With an enterprise value of a mere 24 Mcad (market capitalization of 92 Mcad whereof ~68 Mcad in treasury), we see a huge trigger unveiling itself in the fall when the last permit1 is in place to commence construction of a 5.5 Moz/yr silver mine.
1 Environmental Impact Assessment (EIA)
Before we provide you with some short company facts, we would like to warn readers not to jump the gun here. The MSV stock is extremely illiquid and more patience than usual is granted if you like the case as much as we do.
Due to the low turnover and also the great upside when the EIA arrives, we have not made Minco Silver a large holding. We are thinking that there is anyway room to make a nice profit on a relatively small investment as the stock will in our view surge once the EIA is approved.
MSV was a C$7 stock only 16 months ago when silver was at its all time high and sentiment was at its peak, so the big potential is definitely there. There is in our view nothing that prevents Minco from receiving its EIA and we are taking advantage of the fact that the market is not looking in Minco's way so to speak.
Key facts
Outstanding shares: ~59 Million shares (Fully diluted ~63 Million)
Market cap: ~92 Mcad (C$1.56)
Cash on hand: ~68 Mcad
Enterprise Value: 24 Mcad
Credit facility: 48 Musd (unused)
Shareholders: Institutions hold >60% of the company
Resource base: 158 Moz (of which 55 Moz Probable)
Website: www.mincosilver.ca
Updated presentation: https://www.mincosilver.ca/i/pdf/2012-Silver-Aug-12-web.pdf
(Click to open in new window)
The Fuwan project
Minco has done extensive work and have come a long way already, all permits are in place but one. Infrastructure could almost not be any better with access both through paved highway and waterway/river. Other crucial necessities like power, water, fuel & supplies are easily obtainable. The property also accommodates tailings, waste disposal, & processing plant sites.
Fuwan is an UG operation that will use conventional floatation producing concentrates and recovery is estimated to be 91%. According to the bankable feasibility from 2009, Fuwan has a mine life of over 9 years when producing 5.5 Moz/yr. Cash cost is estimated to US$5.65/oz ($6.71/oz incl royalty) which puts them in the category of low cost producers.
Excellent takeover potential
China is a good location for running a mining operation and Fuwan Silver deposit has all the ingredients of becoming a successful silver mine, hence attracting outsiders. This type of project would be very attractive to a larger company currently operating in the region, like Silvercorp for example, who are building their GC mine nearby.
Analyst Coverage
Minco is currently covered by four firms: Raymond James, BMO, Union securities and Haywood Securities. These are all very prominent and well known throughout the industry, but besides these four, Minco seem to be flying a bit under the radar which is exactly what we are looking for. We have used this to our advantage and we would not be surprised at all to see more brokers and newsletter writers picking up on this story in the next 3-6 months as this story unfolds.
Minco interview on Gecko Podcast
We talked to Ms. Ute Koessler on Friday the 17th of August (IR for Minco for the past 8 years) and we will post this interview on Gecko Podcast later in the coming week.
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