   |
||||||||
Silver at $.11 an OunceBob Moriarty I remember back to the Middle Ages, some eight years ago, with silver hovering around $6-$8 an ounce. There were a lot of silver juniors around selling for $1 an ounce in the ground. If you go back to the later stages of the Iron Age, some ten years ago, silver was going for $.02 to $.03 an ounce. That was the very bottom of the silver market. I said so. Silver Standard was buying silver in the ground at $.025 an ounce. Their stock was about $1.20 a share before shooting up to $45 a share in 2007. If you were smart enough to be buying silver at $.025 an ounce, you will have done very very well. So I was really surprised to hear a story last week about a company in Argentina called Argentex (ATX-V) selling silver (EQV) for $.11 an ounce in the ground. If you want to buy some at that price, you had better buy damned quick. We are approaching a bottom in silver and all mining shares. Argentex is releasing an updated 43-101 based on 26,000 meters of drilling and 25,000 meters of trenching in the next month. If you wait for the new resource, you may well be paying a lot less than $.115 an ounce. Buy it while it’s still expensive. I wrote about the company in early 2008. Ken Hicks was running the company; they had found about 60 km of veins on their flagship Pinguino project in Santa Cruz province in Argentina. They are up to over 100 km of strike length and for all practical purposes have doubled the amount of drilling they used for the last resource. The company focus then was on the indium rich portion of the polymetallic vein system. The project has two unique series of veins of different ages and different mineralization. It has an older indium rich polymetallic vein system and a silver rich, silver-gold series of veins. Ken Hicks stepped down and has been replaced by Peter Ball as President. The focus of the company has shifted to developing the oxide zone of the silver and gold rich portion of the 2nd vein system so they can fast track the project into production. One giant problem with giant projects is that they require giant capital to outline a resource. There are a lot of projects around that spent $50 to $100 million just building a resource. I like the new plan. The company has done a back of the envelope calculation and figured in non-official numbers that they want something like 20 million ounces of silver in oxide material to make a production decision. They already know they have over 100 million tons of silver equivalent material but processing oxide silver and gold through a gravity circuit is a lot cheaper than processing a sulfide polymetallic ore in a flotation system. You might be wondering where I came up with the $.11 an ounce figure for silver in the ground now. First of all it’s a silver equivalent number. This project has silver, lead, zinc, indium, copper and gold in the various veins. Think of it as a silver system, there is more value in the silver than anything else. Based on their 43-101 released in October of 2009, the project had defined 33 million ounces of silver, 300,000 ounces of gold, 400 million pounds of lead, a billion pounds of zinc and 400,000 kilos of indium. Call it 100 million ounces of silver at today’s prices so you can get your head around it. The company has over $7.5 million right now in cash with 71 million shares or about $.10 in cash per share. So you are really paying $.16 a share in enterprise value. (Market cap minus cash) If they have 71 million shares outstanding and 100 million ounces of silver eqv, they have 1.41 ounces of silver eqv per share and $.16 divided by 1.41 is $.11 a share give or take. And we know that’s not really accurate because they have almost doubled the amount of drilling since the last resource. If you buy silver today at $.11 an ounce, you may well be overpaying since in a couple of weeks there will be a new and larger resource. Argentex owns 100% of the project. There is a 2% NSR but it can be bought down at $1 million a point. The company did an initial PEA on the project in 2011 based on the 2009 resource. It indicated a NPV of $130 million, a Capex of $21 million to produce and mill 3000 TPD. It had a blazing IRR of 189% based on $34 silver and $1450 gold. The company is Canadian managed and run by Argentinians. Dr Diego Guido runs the technical staff as well as teaching at the University de la Plata in Argentina. He’s brilliant. Peter Ball is young, experienced and aggressive but he looks like he got into a fight with a lawn mower and lost. I hope he didn’t tip when he got his last haircut. As my readers may have figured out by now, much of this piece has been written tongue in cheek. Life is too short to take seriously. But this company was cheap four years ago at $1.34 and the price today is simply stupid. If people want to throw their shares away for pennies, toss some pennies at them and enjoy a bargain. I was climbing way out on a limb in December of 2001 called silver cheap at $.025 an ounce in the ground when it was $4 an ounce above ground but saying silver in the ground is a steal at $.11 with $32 silver is easy. Obviously I like the company. So does the IFC, the International Finance Corporation, the finance arm of the World Bank who bought 19.9% of the company in 2010. The company completed a $10 million bought deal for $1.15 a share in August of 2011. There is nothing in creation that would justify a 78% drop in the shares since August of last year. Buy them while silver is still expensive at $.11 an ounce. Take some responsibility for your own life. The government is not your mother and isn’t responsible for providing for you and thinking for you and neither am I. I share my work with you for free but you have to take responsibility for your own decisions. Argentex Mining Corporation
### Bob Moriarty 321gold Ltd |
