Pennaluna Prospector™
Month-of-Sundays Update III Edition

Tom Wobker
Nov 14, 2011

Northwest Mining Stock News -- Coeur d' Alene, Idaho - November 11, 2011

[A Note to Readers: This is the last of three special Silver Valley Mining Update issues. Taken together, they give you the big picture changes in the Valley mining industry over the past couple of years. If you missed the first 2 Updates, they are here: Part I ::: Part II.

These Updates ran longish. After this, it's back to our shorter format. If you're a glutton for punishment, you can subscribe to the Pennaluna Prospector for free by clicking here and entering your email address in the little box [at the top of the right-hand column.]

Silver Valley Mining Update - Part III

In this issue:

1. Hecla's Lucky Friday Mine -- new $200 million shaft click
2. Golden Chest Mine -- new JV click
3. New Jersey Mill Expansion click
4. Gold and "The Coeur d'Alene Stampede" click
5. Bunker Hill Mine click
6. News Nuggets click

o Timberline Resources to sell driller subsidiary
o NWMA 112th Annual Meeting
o New Sunshine Silver Mines IPO 
o Shoshone Silver/Gold Mining - new management and $$$
o Pennaluna registers in Arizona

***

1. Lucky Friday Mine - still going strong after six decades

Along the Montana border by Mullan, the Lucky Friday Mine continues to deliver profitable ore after nearly 70 years of full-scale operation.

Last year it supplied owner Hecla Mining Company (NYSE:HL) with another 3.4 million ounces of silver, bringing the record to nearly 150 million ounces plus lead and zinc.

Hecla, headquartered in Coeur d'Alene, is the granddaddy of all the old timers out here. It was started in 1891. The stock has traded on the NYSE for almost half a century -- and before that for nearly 50 years on the old New York Curb Market that eventually became the American Stock Exchange.

Hecla controls 25-square-miles in the Valley. It got the Lucky Friday in 1964 when it acquired Lucky Friday Silver-Lead Mines. At that point, the mine was becoming a noted producer after years as an also ran.

The Lucky Friday claims were first staked in 1889. But over the decades people for some reason decided the ground wasn't very promising. So in 1938 a Mullan gas station owner named Sekulic -- after a tip from an old miner who had worked at the mine -- was able to buy a lease and purchase option for just $15,000. A good deal, as it turned out.

The Lucky Friday today remains such an exceptional property that Hecla says it will spend $ 200 million to expand operations by sinking a deep new shaft - burrowing down to the 8,800 level.

It will be the deepest mine in the District, dropping below the Star-Morning's 7,900 feet.

So far the company has put about $ 70 million into the project and expects to hit $90 million by New Years. It says the new shaft could boost silver output by 60% and extend mine life beyond 2030 -- and maybe even longer.

With no debt and loaded earlier this year with over $ 320 million in cash and equivalents, Hecla has said it plans to pay for all the work itself.

But Hecla's fat wallet has slimmed down lately. Last summer -- after two decades of legal sparring -- the company agreed to pay about $260 million to settle its part in the Coeur d'Alene River Basin Superfund lawsuit. Hecla was the last big miner to throw in the towel. The first installment (a bit over $160 million) was paid earlier this fall.

Despite the size of the settlement, CEO Phil Baker says Hecla can pay it without sacrificing "future growth opportunities".

One of those opportunities could be this: the company is now exploring the Noonday and Noonday Split veins, which lie about a mile away from the Lucky Friday. The veins are near the Star-Morning Mine, another historically heavy producer Hecla also owns. The company is hoping to uncover a rich ore link between the two mines.

HL has roller coastered in the past year between about $ 4.82 and $11.56. It's now down in the lower part of its range at about $6.60.

2. Golden Chest Mine - new joint venture

Several months ago, Kellogg-based New Jersey Mining (OTCBB:NJMC) inked a joint venture deal for the Golden Chest Mine with Marathon Gold (MOZ:TSX) of Toronto.

The Golden Chest is near Murray, in the old time gold rush part of the District. That region in years long past yielded something like 300,000 ounces of gold. [Ed. Note: See Coeur d'Alene Stampede item below.] The mine is thought to be the District's largest historical lode producer, delivering about 65,000 ounces of historical gold.

Marathon will spend $ 4 million to earn half interest and New Jersey will be operator. NJMC has been working at the mine on a small scale for several years and has so far extracted about 2,000 ounces of gold.

The two players have varied backgrounds. Marathon is a young Canadian gold resource development outfit with projects in Newfoundland and Labrador. New Jersey is a 15-year old outfit run by Fred and Grant Brackebusch, the veteran father and son mine engineering team. It has gold, silver and base metal projects in North Idaho and western Montana.

About 10,000 meters of drilling is planned this year, along with underground rehabilitation. Both have been underway for some time. The goal is a 43-101 report of a significant open pit gold resource.

Drill results are intriguing. They show some high-grade intercepts, including one little patch that went over 100 grams gold per tonne. (NJMC president Fred Brackebusch says results are better than even he expected.)

NJMC has traded lately at about a quarter, down from a 52-week high of .35.

3. New Jersey Mill - expanding on the cheap

In addition to the Golden Chest deal, New Jersey is also expanding its mill. But it's not paying for it. Here's why.

In January, United Silver Corporation (TSX:USC) -- 80% owner of the Crescent Mine -- agreed to pay NJMC an estimated $2.3 million to enlarge the New Jersey Mill. It's located near Kellogg, not far from the Crescent. United Silver's idea is to use the fully permitted mill to gain near term milling capacity for Crescent production.

In return for the funding, United Silver will earn one-third interest and usage rights. New Jersey will be operator and keep two-thirds interest.

A summer news release said United Silver had already committed about 70% of the $2.3 million and completion was targeted for year-end. Scuttlebutt suggests the project remains on schedule.

(The Crescent snuggles between two other silver heavyweights: the Sunshine, which produced over 360 million ounces, and the Bunker Hill with over 161 million ounces. During six decades of operation, the Crescent delivered around 25 million ounces of silver at average grades above 27 optsaid to be highest in the District.)

4. Gold and the "Coeur d'Alene Stampede"

Speaking of the Golden Chest and Murray, did you know the Coeur d'Alene Mining District got its start just downstream from them nearly 130 years ago?

The motivation in those days, however, was not silver but rather gold. The story goes like this.

Back in 1883, Andrew Prichard found placer gold in the mountain stream that now bears his name. Word got out and triggered a gold rush that folks called the Coeur d'Alene Stampede. It was the next-to-last gold rush in the Lower 48. (The final was in 1909 near Jarbidge, Nevada, just south of the Idaho line.)

By 1884, thousands of prospectors, miners, merchants, gamblers, "soiled doves", and others came swarming into the remote and roadless Idaho mountains, seeking fortune in the new gold fields. They bunched up in a mining camp on Pritchard Creek called Eagle City. It was wild and wooly, rough as a cob, home to a couple of thousand souls.

The chance for fast money drew famous Old West figures to Eagle City like flies to honey. Calamity Jane showed up. Wyatt Earp and two of his brothers arrived and opened a tent saloon called The White Elephant. Young Maggie Hall came too -- the Dublin girl of negotiated virtue and heart of gold now legendary in the Silver Valley as Molly B'Damn.

But Eagle City didn't last long. In 1885, Noah Kellogg and his famous jackass wandered off one day and discovered rich veins of silver and lead only a few miles yonder on the South Fork of the Coeur d'Alene River. Thus was the giant Bunker Hill Mine born.

The crowd scurried over the mountains to the new find, frantic to stake the silver claims that would make the region's reputation. Gold fever was forgottenbut at $1,700 an ounce, this may now be changing.

[Ed. Note: The story of Eagle City is told by Jerry Dolph and Arthur Randall in their book Wyatt Earp and Coeur d'Alene Gold. You can read about it here:
http://www.museumni.org/books_earp.html ]

5. Bunker Hill Mine - old production, new rumors

The Bunker Hill is an unusual situation we want to mention to you.

Bob Hopper, president of the privately owned New Bunker Hill Mine Company, died last January at age 71. His company bought the Bunker in 1992. Forever after, the gravel voiced miner fought a running battle with the EPA over water discharge.

Hopper maintained the massive Bunker on a skeleton basis while he searched for capital to return it to operation. To fund the efforts, he sold rare pyromorphite crystals from the mine for prices reputed to reach several thousand dollars each. Word is he had backers from Seattle too.

Uncle Bunker sprawls over 500 patented claims on about 6,500 acres. Beneath is a warren of workings that may total 150 miles or more.

Historic ore production was vast, rich in zinc and lead as well as silver. Reported yield was above 35 million tons. Average grades topped 8.7% lead, 3.6% zinc and 4.5 opt silver.

Then a major Valley employer, Bunker Hill faced intense labor conflict during the Mining Wars of the 1890's. There were strikes, shootings, and the Dynamite Express - when hundreds of angry miners hijacked a train, piled in thousands of pounds of explosives, unloaded their cargo at Bunker's mill, and then blew the place to smithereens. Martial law followed.

The New Bunker Hill Mine Company is privately held. So what it plans to do without the iron-willed Hopper at the helm need not be publically announced and is not known.

The mine has strategic location infrastructure and historic and potential mineral wealth. Thus, future ownership is the subject of rumor and barroom speculation around the Silver Valley. We'll let you know if we hear any word.

6. News Nuggets

-Timberline Resources Corporation (AMEX: TLR) of Coeur d'Alene has signed a letter of intent to sell its Timberline Drilling subsidiary to a group of private investors that includes some of the contract driller's managers. The sale is valued at roughly $13 million and due to close by mid-month.

Timberline says the deal will let it shed all debt and focus solely on its core business of gold exploration, development, and production - especially its flagship Lookout Mountain Project in Nevada. TLR, with a 52-week low of .50 and high of $1.32, is trading lately under .70.

-The Northwest Mining Association opens its 112th Annual Meeting later this month at John Ascuaga's Nugget Casino Resort in Reno. The event returns to Spokane next year.

Membership is now 1,300. Attendance at the recent 2011 Silver Summit conference at the Davenport Hotel in Spokane was very good. So we reckon attendance will be strong at the NWMA get together also. For more information, go here:
http://www.nwma.org/pdf/2011regbroch_jul.pdf

-New Sunshine Silver Mines IPO is apparently still in process. We've heard nothing firm on the date of the planned IPO by Sunshine Silver Mines Corporation -- the new Denver-based firm affiliated with billionaire Thomas Kaplan, who bought the 'Shine last year.

The company plans to sell up to $250 million of stock. Big names will underwrite the offering: UBS Investment Bank, Morgan Stanley, and RBC Capital Market. As is common, the S-1 has been amended. You can see it here:
http://sec.gov/Archives/edgar/data/1517006/000119312511245920/d2036
63ds1a.htm#toc203663_12

-Shoshone Silver/Gold Mining Company (PinkSheets:SHSH) of Coeur d'Alene last month announced a major change to board and management, with the new guys bringing in "a substantial influx of new capital". The three new players- Greg Smith, John Ryan, and Howard Crosby - have long experience in the mining industry.

In the past year, SHSH has ranged between .10 and .28. It's trading lately at about 20 cents.

-Howdy, Arizona! Pennaluna & Company is now registered to open new accounts in Arizona. and it only took us 85 years to do it.

That makes 43 states, and counting.

***

Thanks for reading. We'll see you next time.

"All governments are run by liars and nothing they say should be believed."
-Journalist I. F. Stone (1907 -1989)

Editor Tom Wobker

###

Founded in 1926, Pennaluna trades stocks on all U.S. and Canadian exchanges, Nasdaq, OTCBB and Pink Sheets.

Phone 800-535-5329 or visit www.pennaluna.com.

For online trading see www.penntrade.com.

For a free subscription to this newsletter, click here and enter your email address in the little box at the top of the right-hand column.

Disclosure: Pennaluna & Company is a FINRA broker-dealer and market maker. As such, it frequently buys or sells stocks for its own account, or in order to make a market. Consequently, Pennaluna may at any time buy or sell or make a market in any stock mentioned herein, and associated persons may also buy, sell or hold such stock at any time. The firm and/or associated persons may also engage in private placements or other investment banking activities with any company mentioned. Some securities mentioned may be small-cap stocks and subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information; some may be foreign securities and subject in addition to currency, political and other risks. Mention of a security does not imply an endorsement. Comments and opinions are solely those of the writer. This publication is not investment advice; is not a research report and provides insufficient information upon which to base investment decisions; is intended solely to provide readers with information; is not a solicitation for the purchase or sale of any security; and is not intended to be nor should it be used as tax advice, which should be sought from a professional familiar with your individual financial situation. Mention of a company or stock does not in any manner constitute a recommendation, unless specifically so stated. Information is believed accurate but accuracy is not guaranteed. Any websites mentioned other than www.pennaluna.com and www.penntrade.com are not under the control of the firm and it can take no responsibility for information found on such sites.

321gold Ltd