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Let us take you through our strategy on Minco Gold. Minco Gold owns 45% or 14 million shares of Minco Silver (TSX: MSV). At today's price of $2 for Minco Silver, that equates to $28 million. Minco Base Metals' primary asset is White Silver Mountain. White Silver has about 5 to 10 million tonnes of reserves at 1.1% copper, 3.3% lead, 5.1% zinc, 2.1 g/t gold, and 100 g/t silver. For reference purposes, a Tonne is a metric weight of measurement equivalent to about 1.1 tons in the U.S. When you see g/t, it refers to grams per tonne. A gram is about .035 ounces. Back to Minco Silver, since these are not proven reserves, and to be conservative, we will use 2 million tonnes and just count the silver portion which totals around 200 million grams or 7 million ounces of silver. Even if it costs $7 to produce each ounce of silver, the asset is potentially worth $40 million at today's silver price of $13. In the event our valuation of Minco Base Metals is off, please keep in mind that Minco Silver is trading at $2.04 per share, off from its high of $3.62.
With 42.9 million fully diluted shares outstanding, at the current price of $1.14 the entire market cap of Minco Gold is just $48.9 million. Subtract the $28 million value of Minco Silver and $40 million value of Minco Base Metals (White Silver Mountain) and you get Minco Gold and all its reserves not just for free, but at a $14.5 million discount. Insanity? Perhaps. But it gets even better. Minco Gold also has $2 million in cash and $6 million in short term investments. In all, Minco Gold, conservatively, has $76 million in assets excluding the gold mines it owns in China. $76 million divided by 46.9 fully diluted shares outstanding equates to a mind-numbing $1.62 per share in assets, excluding the gold mines in China. In addition, if the prices of gold and silver continue to rise, like we expect, that will obviously increase the asset values even more. With October 16, 2007 anticipated as the record date for the spin-off of Minco Base Metals, we could have our catalyst. The spin-off is slated to be one share of Minco Base Metals for every five shares of Minco Gold you own. It does not matter if you buy Minco Gold in the U.S. or Canada, since the Canadian Dollar is currently worth about $0.99 in the U.S. If you live in the U.S., however, you want to buy Minco Gold, which is MGH on the American Stock Exchange. Our Canadian subscribers will want to buy MMM on the Toronto Stock Exchange.
Now we should focus on what you own as a shareholder of Minco Gold. We encourage you to visit their website at www.mincogold.com, since it is loaded with information on Minco Gold’s properties and excellent management team.
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Minco Gold Properties
Minco Gold currently has six gold projects in various stages of development. Keep in mind that the market is currently paying you to own these properties.
Gold Bull Mountain Project ("GBM")
The 100% owned GBM gold project is located in the western part of Hunan Province in the People's Republic of China and consists of a mining permit and a contiguous exploration permit along strike. Gold-quartz mineralization at GBM occurs primarily within reverse-brittle-ductile-shear veins in a compressive environment with Proterozoic sedimentary rock. Four parallel quartz-vein style gold zones have been recognized with a strong continuity along strike and dip directions. Minco Gold is targeting gold production in 2008 at GBM and explosive storage, road construction to the mine, and a mine-site assay laboratory have been completed. Also, Minco Gold has restored power and water to GBM. The location, well situated along a large man-made hydroelectric reservoir, is accessible by road and boat. Hydroelectric power, telephone lines, cell-phone service, and labor are all available nearby.
Yangshan Gold – Northeast Extension
Minco Gold’s wholly-owned subsidiary, Minco China, presently holds 13 exploration permits in the Longnan region of south Gansu Province, within the southwest Qinling gold field, in China. This project includes 13 exploration permits with the potential for gold, silver, lead, antimony, and zinc.
Changkeng Gold Project
Exploration potential for 870,000 oz based on 21 diamond drill holes on a 160 x 80 meter grid, with a right to earn 51%. Located in southern China, close to the provincial capital city of Guangzhou, this project has access to excellent power and transportation infrastructure. It consists of a disseminated, sediment hosted gold deposit with a 180 meter strike length extending from surface to 250 meters in depth. 8 holes drilled by Minco in 2004 confirmed grade and widths reported by a Chinese exploration team.
Xiaoshan Gold Project
Xiaoshan is located on a structural zone parallel to Silvercorp's (yes, the same Silvercorp that went from $2.00 to $20.00) Ying Silver Project located 30 kilometers to the south. The Xiaoshan and Ying projects demonstrate very similar geological settings, structures, and mineralization styles. The project consists of two exploration permits, the Huluyu permit and the Dafangshan permit, for a total land package of 29.1 km. Within the Huluyu permit, thirteen gold and silver veins have been mapped at surface. Sampling by the Henan Nonferrous Exploration and Mining Company from underground workings at Huluyu have returned values ranging from 3.0 g/t to 74.6 g/t gold, 121 g/t to 726 g/t silver, 3% to 29% lead, and 1% to 23% zinc. Within the Dafangshan permit, 7 gold veins have been mapped at surface that vary in length from 212 m to 772 m with average widths from 0.42 m to 0.65 m and average gold grades from 3.00 g/t to 5.77 g/t.
Gobi Gold Project
Located in Inner Mongolia, about 300 kilometers north of Yinchuan, the capital city of the Ningxia province. The exploration permits cover 30 km and surround the active, 1500 tonne per day Zhulazhaga gold mine. Minco Gold is targeting Gold-skarn mineralization.
BYC Gold Project
The project is located 50 km northwest of Baotou, a major industrial city in Inner Mongolia. Good transportation and power infrastructure are easily accessed from the project area and exploration programs have identified a gold-bearing shear zone located on the northwest flank of a large granite intrusion. |
A Historic Time to Invest in China
China’s wealth and economic power are on the rise with an economy growing at a rate of 10% per year and many of its 1.3 billion people migrating from farms to factories. Couple this economic clout with the attention from the rest of the world as a result of the 2008 Beijing Olympics and it adds up to stock market profits. Many investors are interested in profiting from this historic period of growth for China, but end up scratching their head in dismay for a variety of reasons.
The major banks and infrastructure have been covered by U.S. investment opinion for years. In fact, Chinese companies made many U.S. investors millionaires over the last 3 years". A $10,000.00 investment in Best NetEase.com (NTES) was worth $563,580.00 in the three year period between 2001 and 2004. China Yuchai International (CYD) posted a 157.62% average annual return between 2001 and 2004.
China is known to the rest of the world as a manufacturing powerhouse. But it is also a fast-growing market for retailers. According to a Business Week report, the nation's overall retail business has risen 15% annually for the past 20 years, making it the third largest retail market in the world.
Summary
Minco Gold Corporation represents, what could be, one of the greatest undervalued companies in the market today. The market cap of all the gold and silver companies in the world is only around $150 billion in an upwards of $10 trillion global stock market universe, with three companies, Newmont, Barrick and AngloGold making up a big percentage. A small shift in these funds would cause an explosive up move in the gold and silver stocks. China should produce 260 tonnes of gold this year, still about 100 tonnes short of Chinese demand. Caibai, Beijing's largest gold jewelry retailer, posts the updated price of gold on a daily basis so its trendy customers can follow the price.
Research from Penn State and McKinsey that examined 25 years of stock market history shows spin-off stocks generally outperform the S&P by 10% per year in the first 3 years of independence and their peers by more than 6% yearly after the spin-off. We strongly suggest adding shares of Minco Gold to your portfolio.
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