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Message: and another BUY recommendation

and another BUY recommendation

posted on May 15, 2008 02:53AM
Minco Silver Corporation (TSX: MSV) (OTC: MISVF) (Frankfurt: XYD)
Minco Silver: Deep Discount to the Market Per Ounce of Silver in the Ground

Minco Silver Corp. (TSX: MSV) (Pink Sheets: MISVF) is a Canadian company focusing on the acquisition and development of silver dominant projects in China.
Minco Silver is the exclusive vehicle for pursuing silver opportunities in China pursuant to a strategic alliance agreement between Minco Gold Corporation (TSX: MMM.TO)(AMEX: MGH) and Silver Standard Resources (TSX: SSO). The Fuwan Silver was originally spun out of Minco Gold in 2005. The primary focus, at this point, is to move toward production with its primary asset, a 100% interest in the Fuwan silver project located in Guangdong Province (in southeastern China).

In our opinion, investors will want to become shareholders of Minco Silver at current price levels. Canadian investors will want to buy MSV on the Toronto Stock Exchange. U.S. investors will want to buy the stock using the symbol MISVF on the Pink Sheets. Either way, you are a shareholder in Minco Silver. Shareholders of several other North American listed mining companies operating in China have made incredible profits from their investment. Investors who bought Silvercorp (TSX: SVM) (Pink Sheets: SVMFF) at $3.00 in December of 2005 have seen its shares rocket to $23.00, and hold there. Eldorado Gold (NasdaqGS: GOLD) has traded up from $15.00 to over $35.00 in the same time period. In our opinion, Minco Silver has the same potential and we believe investors could see similar returns.

In this price range, Minco Silver is one of the cheapest silver equities by ounces in the ground when compared to other silver stocks. Minco Silver's parent company, Minco Gold, controls 41.8% of the outstanding shares and Silver Standard has a 13.2% interest. Obviously, with such a large ownership stake in Minco Silver, both Minco Gold and Silver Standard are looking for a large return on their investment. This is a great opportunity for smart investors to ride along.

Fuwan Silver Project

Upon production, the Fuwan Silver deposit is expected to rank among the top ten silver mines in the world. Minco's Fuwan project has delineated 143 million ounces of high-grade silver over a 2.8 kilometer strike length within a 10 kilometer mineralized trend. The property covers about 200 square km, of which only 2 square km has been explored to date. The entire property is considered to have strong silver potential which could amount to several hundred million ounces. As a result of this property, Minco Silver is expected to be a 4.9 million ounce per year silver producer by 2010.
Unlike most mining properties, the Fuwan property is one of the few mineral projects in the world that already has a significant infrastructure in place, which is expected to save the company tens of millions of dollars in development costs.

Tansportation is made easy with a four-lane highway that passes by the property and labor is available from the town of Fuwan (pop. 5,000) and nearby Gaoming City (pop. 100,000). Power and telecommunications are readily accessible with high-voltage power line crossing the property. The adjacent Xi Jiang River also provides access to the South China Sea, which is the international waterway for shipping. Easy access to a shipping channel also facilitates the disposal of waste rock and carries with it a significant economic benefit. The Company has been approached by several construction companies from Guangzhou City to purchase the waste material at an estimated price of US$2.50 per tonne to be used for gravel and construction material. The sale of this waste rock is expected to reduce costs significantly, increasing profitability.
China is now the world's third largest producer of Silver having generated a record 7000t in 2006 (including reclaimed Silver). China also exported 2,800t of Silver in 2006. The majority of this supply is from many small mines rather than a few large producers. China has been extremely friendly to western technology in the mining sector, since it requires the resources to fuel it's growing economy. It makes sense for them to utilize western mining technology.

Minco Silver's huge discount to the market per ounce in the ground is the real reason to own this stock. Investors looking for the cheapest ounce of silver in the ground need not look any further. An updated and revised NI 43-101 Technical Report dated November 2, 2006, calculated an inferred silver resource of 112.9 million ounces (19 million tonnes averaging 185 g/t Ag with a 75 g/t cut-off) on the Fuwan silver property. On December 11, 2007, the company reported a resource update that upgraded the overall tonnage of the Fuwan silver deposit from 19 million tonnes to 23 million tonnes, increased the 128 million ounces of silver to 143. million ounces, and upgraded 4.5 million tonnes (containing 29.2 million ounces of silver) to 9.9 million tones, with an average grade of 181g/t silver.

The Fuwan Project is on a prominent ridge overlooking the Xi Jiang River and groundwater was a concern for this project. The Fuwan Silver Project is an underground mine so understanding how the water would impact mining was a key part of the feasibility study. Minco Silver conducted a hydrological study which answered these questions; drilling 18 hydro-geological holes to check water inflows and movement. Initial indications show there is no connectivity between the river and the mining envelope. What a hydrological study ascertains is whether groundwater flows exceed what can cost effectively be pumped out to keep the mine dry and miners safe. Minco has shown that they have a viable, safe mining envelope in which to mine.

Minco's Fuwan project has an indicated silver resource of 143 million ounces of high-grade silver, (with a new resource upgrade pending during May 2008) which gives Minco Silver the potential to be a 5 million ounce producer by 2010. At today's price of $16.87 an ounce, the project has an in situ (in the ground) value of $2.16 billion. If Minco Silver produces 5 million ounces, net sales could be $65 million, at current prices. Silvercorp, by comparison, posted $45.3 million in net sales for fiscal '07. The market is currently valuing Silvercorp with a $1 billion market cap and Minco Silver with a 71.2 million market cap. The key to remember is that Silvercorp shares have moved from a few dollars to their current $22.00 level as their mine went in to production. Obviously, the time to buy Minco Silver is before it starts production on its Fuwan project.

Silver in China
China's expanding economy has resulted in increased industrial silver demand, which has been largely overshadowed by demand for other industrial commodities, particularly base metals. A lack of significant increase in world mine production combined with increased silver demand has resulted in a declining silver surplus, which is expected to lead to a deficit situation in the next few years. The increase in silver consumption is also benefiting from a general change in China's precious metal policy and deregulation of the silver market -- reflected in the establishment of the Hoatong Silver Exchange in 2000.


China is one of the world's fastest growing economies with a giant appetite for natural resources. Worldwide, there is currently a shortfall in silver on an annual basis. Minco Silver is one of the cheapest silver equities by ounces in the ground when compared to other silver stocks. Upon production, the Fuwan Silver deposit is expected to rank among the top ten silver mines in the world. It is now easier and more secure than ever for foreign mining companies to operate in China. The Central government has taken bold steps to encourage foreign investment and participation in developing China's mining industry.

In our opinion, anyone interested in investing in silver stocks should not hesitate to buy Minco Silver at these levels. In fact, in our opinion, almost anyone who invests in small-cap stocks could benefit from adding shares of Minco Silver to their portfolio.
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