MONDAY, MAY 12, 2008

Market Commentary

Silver have I none, but gold I have a plenty…The proverbial streets of heaven are paved with gold, not silver. Silver is the stepchild, the black sheep brother to all that glitters. But all that glitters is not gold.

Recently, the lead article on the Monex Precious Metals website, one of the leading precious metals investment companies, stated:

“…between July 1, 2003 and November 30, 2006, the price of gold increased approximately 84%, while the price of silver increased more than 200%. In addition, there is a compelling argument for silver investing because the economic and monetary fundamentals in place today are even more bullish than the conditions of the 1970s when the silver price exceeded $50 per ounce. Yet today's market prices, at below the $20 level, are a mere fraction of levels projected by silver industry experts for the future.”

According to the Silver Institute, industrial uses of silver have grown steadily since 2001. The rapid growth of China’s and India’s economies and new technologies using silver has contributed substantially to the rise in the global demand for silver. Used for brazing and soldering, in coatings for electronic components, and increasingly for its antibacterial properties, demand for this precious metal will continue to grow. In 2007, China was the world’s third largest silver mining country behind Mexico and Peru.

We recently initiated research on Minco Silver (TSX: MSV) at $3.50 with a 24-month price target of $6.50 based on 10x 2010 projected earnings of $0.65. Located in Guangdong Province, China, Minco’s Fuwan Silver project is potentially the largest silver mine in China and potentially one of the top ten silver mines in the world. The Fuwan Silver Project is estimated at 143 million ounces. Minco’s potential for low operating costs made possible with an existing infrastructure, nearby smelters, nearby port facilities and zinc, lead, and gold by-products is another upside advantage in this silver play. Even at $12 an ounce, the payback period on this project is only 1.7 years. At silver’s current price of $16.50 an ounce, the payback is less than one year. This company makes money at any price above $2.40 an ounce. I don’t see a downside here.

Some of the largest funds and institutions in the world are betting MSV hits it big. Institutional ownership includes Royce Funds, Goldman Sachs, and CIBC World Markets.

Minco Silver offers serious investors a 100% to 400% return over the next 24 months with very limited downside risk. Couer D’Alene, (NYSE: CDE), a direct competitor, trades at 21x earnings. Our silver analyst is projecting earnings of $0.65 a share in 2010. If Minco trades in line with Couer D’Alene, it would trade at 21x earnings, giving it a price of $13.65. Silver glitters too.