Silver Falcon Mining in good company in Idaho June 24/08.

The June issue of ResourceWorld magazine has a nice article on the Idaho Silver Valley with an overview of several silver miners. The historic Silver Valley is in the Cour d’Alene region of northern Idaho. Silver Falcon is situated in the Owyhee Gold Trend in the likewise historic, Silver City Mining District of southern Idaho. For these prolific silver and gold mining areas, Silver City, like SilverValley has encountered many ups and downs since the action started in the 1880’s.

In 2000 and 2001, with the price of silver under $4.50 and gold about $225, both areas were virtually shut down. Today, with silver well over $16/oz. and gold approaching $900 and with expectations that much higher prices are on the near horizon, the tables have turned and the opportunities are many. Silver Falcon’s Eagle Mountain property, like Silver Valley’s is characterized by high grade silver veins ( SFMI has gold alos) varying in width from a few inches to 8 ft. SFMI’s War Eagle Mountain has three main veins with extensive length and depth, maintaining grade at depth with consistent yield. (See Kinross report on website). The Idaho Bureau of Mines report on War Eagle (not yet released to SFMI for news releasing) states that the Oro Fino vein alone varies in width from .5 ft. to 25 ft. with gold grades of .5 oz. to 2.5 oz/ton (77gms.). That’s roughly equivalent to from 25 oz/ton to 125oz/ton (3875 Gms) silver! Ratios of gold to silver are 1 oz.gold to 14 oz. silver. Estimates of reserves that do not include the new claim areas, are 5 to 8 million ounces of gold, or about 250 million to 400 million ounces of silver equivalent dollars! That does not include the 36 tailings stockpiles with high grade gold, silver and good concentrations of rare metals, extremely high grade 25 oz/ton “hot spots”….or the large new exploration targets.

Who are some of the silver miners in Silver Valley and how do they compare to SFMI?

Here is a list with salient features.

New Jersey Mining Co. (NJMC-OTCBB)

- 33 cents; 35 million shares

-125 ton/day mill near Kellogg.

- Gold Chest mine: 158,000 tons @ 5.5 gm (.18oz.) gold/ton

- Toboggan Project: exploration with Newmont; needs $2 million $10 million over 3 years with increasing interest.

Azteca Gold Corp. AZG-TSX-V

- 17 cents; 98 million shares.

- Option to purchase New Bunker Hill Mining co. for upfront $4 million and $46 million final price. Lead, silver and zinc.

- Projects in Nevada, Mexico and Alaska.

- Acquires high grade mines.

- Capital requirements? More dilution via more private placements? Production?

Hecla Mining HL-NYSE

- $7.95; 127 million shares.

- Multiple projects and in production.

- Lucky Friday Mine in Mullan, Idaho; 5.6 million ounces silver/year.

- Operating for 65 years; encountering ore at 8000 ft.

- 1000 ton/day.

- Potential of 130 million oz. of silver

- Low cash cost/oz. due to zinc values.

Sterling Mining Co. SMQ-TSX

- $1.32; 38 million shares.

- Sunshine Mine acquired in 2003 (goes back to 1903).

- Production 2.8 million oz silver in 2008; 3.9 M in 09; 5 M in 2010 @ 400 tons/day.

SNS Silver SNS TSX-V

- 42 cents; 40 million shares.

- Purchased Crescent Mine in 2006 held since 1990s by State of Idaho.

- 31 million oz. high grade silver production since 1890s.

- Developing resources via exploration.

- 200 to 300 TPD expected by year end.

- Need $5 million to $10 million to get into production.

- Silver Wheaton owned 12%

US Silver Corp. USA TSX-V

- 40 cents; 186 million shares.

- Purchased the assets of Coeur Silver Valley with Galena mine in 2006.

- 160 million oz. silver since 1953.

- 800 TPD silver-copper Galena and 400 TPD Cour Mill silver-lead.

- Proven and probable 10.8 million oz. silver.

- Success in finding new vein systems. (Silver-copper and silver-lead).

- 500 TPD growing to potential 1,600 TPD.

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SFMI, in the Silver City Mining District has all the production and exploration potential that the above Silver Valley miners exhibit. All have the potential to discover new silver vein structures but SFMI has gold and rare metals as a bonus. All the properties have long mining operating histories and all show excellent growth potential. SFMI is unique in having a very low share issue with very few free trading. It has cash in the bank, 70 to 100 TPD production commencing almost immediately, no need for future share dilution with cash flow ramping up rapidly, amazing potential….all for 10 cents/share! Crazy.

Note: all of the above companies have had serious declines in their share prices over the last year during the last two year consolidation cycle and decline of JPM share prices. There are many reasons for such losses, which fly in the face of the increase in the price of silver bullion which was about $8.50/oz.in 2006 and gold which was at about $550 /oz. vs. $17 silver and $900 gold this year. The fundamentals for both are extremely positive as supply decreases and the demand increases.

The Junior Precious Metal company’s prices are counterintuitive to underlying value and normal market trading. Although there is ample evidence to suggest market intervention/price manipulation in the price of both bullions there is also a correlation to the historical precedent set in the late 1970 when both went parabolic to the upside and ended on their highs of $50 silver and $850 gold…which in real dollars today would correspond to about $125 silver/oz. and $2000 gold/oz. There is evidence to show that there is almost one year’s silver production shorted on the markets today and about 15,000 tons of gold.

When will the pendulum start to swing back to equilibrium and then the other extreme? Many think it will be by or before this fall. Can you imagine how that will affect all the JPMs?