SDRG ArticleFound this posted on the $HUP board...
SILVER DRAGON RESOURCES, INC. (OTC BB: SDRG)
High Growth Special Situation
December 22, 2005
Silver Dragon Resources Inc. (OTC BB: SDRG) is a well-managed company that is positioned for major growth as the world’s demand for silver continues to accelerate. Globally, silver inventories have declined significantly over the past 15 years, resulting in recent price increases. SDRG, through its exploration and development activities, is prepared to become a major beneficiary of this favorable trend. With a current market cap of only $7.5 million, SDRG shares are extremely undervalued and have significant appreciation potential as the Company helps meet the growing demand for silver.
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Ticker (Exchange) SDRG (NASDAQ OTC:BB)
Recent Price (12/19/05) $0.25
52-Week Range $0.04 - $0.38
Shares Authorized (mm) 150
&;nbs p;
Shares Outstanding (mm) 35,670,533
Approx. Float (mm) 8 Million +/-
President / CEO: Marc Hazout
Business Tel: (416) 661-4989
Website: www.silverdragonresources.com
Corporate Overview
HIGH GROWTH SPECIAL SITUATION
Silver Dragon Resources Inc. (OTC BB: SDRG) is a well-managed company that is positioned for major growth as the world’s demand for silver continues to accelerate. Globally, silver inventories have declined significantly over the past 15 years, resulting in recent price increases. SDRG, through its exploration and development activities, is prepared to become a major beneficiary of this favorable trend. With a current market cap of only $7.5 million, SDRG shares are extremely undervalued and have significant appreciation potential as the Company helps meet the growing demand for silver.
CORPORATE OVERVIEW:
Silver Dragon Resources Inc. is a mining and metal company focused on the exploration, acquisition, development and operation of silver mines in proven silver districts globally.
Corporate Strategy
By leveraging existing relationships with those in the silver industry, Silver Dragon seeks to build a large and diversified silver portfolio. The portfolio will comprise three distinct types of mining properties:
?Promising exploration targets;
?Highly-leveraged, out-of-the-money silver deposits; and
?Former producing properties with significant untapped exploration potential.
SILVER HISTORY & OUTLOOK
Recently the price of silver has been trading around $7.50 - $8.50, which contrasts to prices ranging between $4.00 to $5.00 per ounce for most of the period from January 2000 through June 2003. Prices broke out of that range as the end of June 2003, and have traded above $6.00 for most of the time since December 2003, rising as high as $9.35 in December 2005.
Silver prices have risen for several reasons. The single most important reason may be that available inventories of silver are reaching low levels. Over the past 15 years bullion inventories are estimated to have declined from 2.2 billion ounces to 300 million ounces today.
Silver is the most proficient conductor of electricity, and is used in many products including film, solar cells, thermal windows, silverware, and many decorative items. The list of industrial and technological uses for silver goes on and on. There are many applications where only silver can be used as opposed to gold or other metals.
With the unstoppable progress of technology, the demand for silver should never decrease, and in fact should increase proportionately.
One of the factors an investor should look at is the fact that the price of silver has not usually swung wildly with the rise and fall of the value of the dollar. Silver has been known to increase in value even when the value of the dollar has fallen sharply. When an investor is looking for safety and consistency, having silver as part of your investment portfolio certainly seems appropriate and wise!
There are several options for the investor who is looking to include silver in their investment portfolio. Silver bullion bars, coins, or medallions can be bought as a direct product and stored by the investor. This can pose the problem of adequate security and the cost of storage fees. One of the advantages of this kind of silver investment is that conversion into cash can be fast.
However, it seems logical and very appropriate for investors to purchase some good quality silver mining stocks for their portfolio and Silver Dragon is clearly a logical candidate.
Where is the price of silver headed? It is clear that the price of silver remains low compared to its highs of 1979-80 when it hit $50 per ounce. At that time, gold was trading over $800, equating to a gold/silver ratio of 16:1. The current gold/silver ratio is 60:1, and according to CPM Group, a gold/silver ratio of 40:1 appears reasonable based on the long-term bullish prospects for both gold and silver prices.
CHINA CONNECTION BODES WELL FOR ENORMOUS FINANCIAL SUCCESS
Silver Dragon Resources and Sino Silver Corp. each own a 30% interest in the Aobaotugonao Silver Project located in the Erbaohuo Silver District near Gaoyingzi Village, Muxiga Town of Keshiketeng County in Inner Mongolia. This project has significant potential for major silver discoveries.
The rise of China as a major economic power has been a central theme in almost every sector of the world economy, from autos and electronic components to silver, lead, and copper. It is true that China is emerging as a major force in most markets. China represented less than 10% of world smelting and refining capacity for copper, lead, and zinc 15 years ago. Now it represents between 20% and 30% of each of these sectors. These trends will continue in the future.
China will be critically important to silver. However, the importance China has played in the silver market over the past five to ten years, and the importance it will play in the future, often are quite distinct from the points made about China in market reports.
Over the past several years China has emerged as a major user of silver. This includes photographic films and papers, electronic chemicals and components, and other applications. In many of these applications, Chinese use of silver has been more for the export market than it has been for domestic consumption. This has begun changing, especially since 2002, as Chinese domestic consumption of many silver-bearing manufactured goods has accelerated. However, much of the growth has been a shift in manufacturing of these products from major industrialized nations, South Korea, Taiwan, and even India, to China.
Chinese exports of silver also have been important, and significantly misunderstood. China has exported a great deal of silver over the past few years. Most of this has come from two types of sources. One of these sources is silver refined as a byproduct of lead, zinc, and copper smelting. China now is a major site for refining of base metals, and Chinese smelters, private companies, have been aggressive buyers of base metals concentrates around the world. Chinese base metals smelting and refining uses both domestic and imported mine output, concentrates. The gold and silver that is being recovered from these concentrates generally does not have a market within China, and so it is being exported.
The second source of Chinese silver has been from scrap recovery and other refining operations. Eastman Kodak invested more than $1 billion in modernizing the Chinese photographic industry from the late 1990s into the current period. Part of this modernization included sourcing silver overseas and importing silver nitrates into China. This displaced the silver that had been sourced domestically within China prior to this modernization program, estimated to have been as much as 40 to 50 million ounces per year. This silver needed to find a market. As with the smelter output, a domestic market was not readily present, so much of this silver has been exported.
Very small quantities of silver have been sold from government inventories during this time, and the Bank of China has issued public statements pointing out that it has not been the source of most of the silver coming out of China. Even so, rumors persist that the silver coming from China has come from government inventories, which may 'run dry' at some point. This has not been the case, however, and the shift in the flow of refined silver from China into the world market should be expected to continue. The Bank of China meanwhile has ceased being the national gold and silver market maker, as part of a liberalization of the precious metals markets within China. Since it had served this role up until 2002, it assisted the newly emerging, deregulated private refiners, smelters, and exporters in arranging shipments of metal overseas. The fact that the Bank of China served as a shipping expeditor for some of these private sector sellers may have contributed to the misunderstanding as to
the source of the silver.
Moving forward, China will continue to be a major source of silver supply and demand. The demand for silver will reflect both domestic consumption and its role as the manufacturer to the world of a wide array of silver-bearing products. Photo film and paper plants are being closed in other countries, with the film and paper for these markets being sourced from newer, more efficient, and lower cost Chinese plants built over the past several years. The same is true with chemical catalysts and electronics components.
China also will become a more significant miner of silver. At present, most silver mined in China is byproduct of base metals and gold, in a pattern similar to that in other parts of the world. This will continue, although there are some attractive silver deposits that may be exploited primarily for their silver in the coming decades.
MEXICO ?SIGNIFICANT JOINT VENTURE
As part of its global expansion and diversification plans, on September 13, 2005, the Company announced the signing of a Definitive Agreement with Linear Gold Corp. whereby Silver Dragon has been granted the option to acquire 55% of Linear’s interest in and rights to any revenues derived as a result of the exploration, evaluation and development of their Tierra Blanca property located in Durango, Mexico.
Silver Dragon conducted extensive preliminary due diligence on this property since initially signing a Letter of Intent on June 1, 2005. The Company is encouraged by their review of the technical data as it indicates that the property has excellent potential for the discovery of major silver deposit. Silver Dragon has completed a work program this month (December, 2005) and expects results from this work program before year end.
Complete details on this acquisition and synergistic partnership with Linear Gold Corp may be found by reading the complete Press Release dated September 13, 2005.
This is an exciting and potentially very lucrative project, which further diversifies and expands Silver Dragon’s footprint and exploration activities.
On December 13, 2005 Silver Dragon announced the acquisition of Cerro las Minitas Silver Mine in Durango, Mexico. The property consists of approximately 1,302 hectares. This large land package is located in a prolific silver district in Mexico and includes 4 mines having a total of 9 shafts with depths that range from 30 to 200 meters, including the El Santo Nino, the Puro Corazon, the Mina Pina and the Mina La Bocona silver mine. This transaction results in the Company becoming the owner and operator of a producing silver mine in Mexico.
Production at the mine during the first 12 months will continue at a rate of approximately 50-100 tons per day with an anticipated increase to 200 tons per day, and year 2, anticipated increases in production to 500 tons per day. Average ore grades being mined are presently 280 grams/tonne silver and approximately 4-6% lead and zinc values. Total production cost per ounce of silver is presently approximately $5.50 per ounce.
Silver Dragon will continue to acquire, explore and develop silver and precious metals properties in promising areas throughout the world!
$10 MILLION TERM SHEET
On November 30, 2005, Silver Dragon announced that it had has signed a $10 million Investment Agreement with Dutchess Private Equities Fund, LP of Boston, which provided the Company with a commitment for $10 Million in equity financing.
This financing is a strong indication of the increasing confidence in Silver Dragon and its business plan. A financing of this magnitude allows SDRG to capitalize on many opportunities, taking advantage of viable prospects as they are presented!
SUMMATION:
Silver Dragon Resources Inc. (OTC BB: SDRG) is an excellent choice for those investors who desire to diversify their portfolios with a well-managed silver stock that is clearly undervalued and has major upside potential. Global Supply / Demand trends indicate that silver has a very positive future. We feel that SDRG is the best vehicle for equity investors seeking exposure and leverage to higher silver prices.
James Parker and Ph.D. . Paul Kulp
Phone: (INSERT 800 # for EGS HOTLINE)
Fax: 310.388.5638
Email: research@emerginggrowthstocks.com
Web: www.emerginggrowthstocks.com