SDRG's grand plan continues....The sale of the Erbahuo mine is yet another step in SDRG's evolution, yielding yet more focus to where it is going.
The $1 million sale price may not sound like a lot, but it buys them yet more time when costly dilution will not be required. The stock has already tripled this fall, and given all the positive things evolving at the Comany and in the silver markets, it's hard to believe the stock will not be significantly higher by the time another financing is required.
Additionally, they no longer have to "own" the mature Erbaohuo mine. The 70% ownership they had in it required them to actively manage the Chifeng Silver Dragon subsidiary that owned the mine, which among other things caused some difficult accounting requirements. Erbahuo was clearly a "non-core asset", so to me the $1 million of non-dilutive capital is free money for shareholders.
Now the Company is far more optimally positioned, with 40% of the eight Chinese exploration properties and 100% of the Mexican property. As was noted in the press release, "We are currently accelerating our exploration programs at our Dadi and Laopandao properties, which we intend to develop into producing assets."
That acceleration refers to additional 2009 expenditures atop the already huge US$5 million program that commenced int he spring, which were approved following the enormous discovery at Dadi described in the September press release. Six months of drilling/tunnelling results are being compiled, so I'd expect numerous press releases over the next six months on drilling results.
And, as I noted in earlier emails, Shengda is hell bent on production, as that is what they do being the largest private silver miner in China. I'd be shocked if a production decision is not made next year, and in China the time lag between such decisions and actual production can be less than a year. And given the numbers so far at Dadi, as well as what the buzz appears to be, I wouldn't be surprised if Dadi wasn't as big as Bairendaba, the largest silver mine in China (and directly next door to Dadi).
Plus, revenues are now flowing in from Mexico, and that environmental permit is getting very close to being awarded. Margins on toll milling pale in comparison to margins on producing from your own mill, and the grades at Cerro las Minitas (Ag, Pb, and Zn) are quite high to start with. CLM could turn into quite a large cash flow machine in 2010, at which point exploration would undoubtadely recommence as the Company moves again toward its goal of proving up the 100 million+ Ag ounces that is believed to be there.
And Marc continues to work his tail off to benefit shareholders, particularly himself as he owns 20% of the Company. He left this morning for three days in Mexico, and next week he is going to China for another 2 weeks or so, which would be something like his 6th or 7th trip to China this year alone.
Moreover, the PM markets look to be on the cusp of explosion as the Cartel appears to be on its last legs. And China is clearly taking over the mantle as the gold/silver king of the world, in terms of ownership, production, and consumption. Silver Dragon remains one of just three companies worldwide licensed to produce silver in China (Minco and Silvercorp are the other two), but it is the only one with a major Chinese partner in Shengda.
And now that the Chinese public is being forcefed gold and silver by its government, how long will it be until the recognize the SDRG investment vehicle en masse?
That being said, does anyone doubt that SDRG is not getting ready for a quantum move upward?