Silver Striker: Massive Silver Mine Running Beneath Great Wall?

By Travis Johnson, Stock Gumshoe, January 18, 2010

Today’s holiday look is at a silver mining company with a mother lode strike in China … this time, the tease is from the Sound Profits newsletter by the Investors Daily Edge folks, and they would, of course, be delighted to have you subscribe to their newsletter to find out who this “Silver Striker” company is. Here’s how they tease the stock:

“Strike runs hundreds of miles… contains up to 30 billion ounces worth $514 billion…

“Could send shares of this American miner soaring 4,662% starting next month…

“Hundreds of miles south of Beijing…

“Deep in the remote foothills beneath the Great Wall of China…

“An American junior mining company has made an amazing discovery.

“This silver strike stretches 186 miles. It could contain, by our estimates, 30.2 billion ounces of silver.

“That’s enough to feed world demand for the next 32 years, according to the World Silver Survey…

“Enough to double current global stockpiles… 214 times.

“And enough to make one tiny mining company $514 billion richer…

“For now, the company trades around $7. But that could change, very quickly.”

So who could it be? We get a few other clues as we troll through the email …

“So not long ago, the Striker decided to pour the bulk of its exploration budget into the Great Wall strike – (It’s plans to spend $8 million in the first half of 2010, and another $8 million in the second half.)

“Geologists continued to swarm the strike zone’s 50 square kilometers of foothills.

“And they spared no expense. They created seismic geo-maps. They used computers to analyze chemicals in streambeds. They used special cameras to gather data – at the atomic level. Miners blasted 78,581 meters of trenches. They drilled 280 test holes.

“Meanwhile, outside firms were called in to verify all the findings.

“They included private companies like SRK Consultants China and BK Exploration Associates.”

OK, so that’s actually enough — the mine they must be referring to with the 78,581 meters of drilling and 280 holes is the Ying mine, which is the flagship property of and is roughly three-quarters owned by …

SilverCorp Metals (SVM in both NY and Toronto)

SilverCorp is not an American company, but they are US-listed (they’re Canadian, with the actual operating businesses all being Chinese subsidiaries) — but otherwise it matches the clues pretty much perfectly, including the $8 million in capital expenditures planned for the second half of this fiscal year, and the 300 km (186 mile) long silver zone. And they did use SRK Consultants China and BK Exploration in their resource estimate work.

SilverCorp is a new favorite of many, many newsletters — I saw a video with Martin Hutchinson where he alluded to his favorite Chinese silver miner and was clearly hinting around SilverCorp, and Matt Badiali touted the shares last Summer (I wrote about it at the time, and owned shares for a while last year as well — I don’t currently own SVM stock or have any other interest in the shares).

SilverCorp gets attention not only for being the biggest silver miner in China, with a tight relationship with the government and plenty of opportunity for additional exploration, but for being one of the lowest cost miners in the world. Thanks to significant output of both lead and zinc as “byproducts” at the Ying mine they’re able to mine silver at an effective price of something like negative $6 per ounce (meaning they make money even before they sell the silver).

Does their strike really run under the Great Wall of China? That I’m not so sure about — it’s certainly possible, the Ying mine is near the Luo River and from what I can tell from browsing a few maps the mining site is fairly close to sections of the wall. Close enough for me.

So what do you think? SilverCorp took a nice ride in the second half of last year as silver heated up, and it is a well-capitalized silver miner that is making money and paying a teensy dividend, it’s clearly not a junior miner that’s at huge risk of failing to discover silver, but it is, of course, in China and subject to Chinese regulatory and ownership risks (and in their favor they also enjoy lower Chinese operating costs, and lighter environmental regulations). If you’re willing to own a company that has to partner with the government to do well, and you think silver prices are likely to climb, SilverCorp is probably at least worth a look — plus, if the last few months are any indication, it seems likely that if we get a silver price spike the newsletters will probably tout the heck out of the shares, which tends to drive them up as well.

Got any opinion on SilverCorp? Feel free to share it with a comment below.

And I’ve written very little about Sound Profits before, though Steve McDonald, who helms that newsletter, has gotten some press here as a bond guy (his Bond Trader is in the top ten newsletters right now, though choosing investment-grade corporate bonds is of course different than recommending a small Chinese silver miner). If you’ve subscribed to Sound Profits, please click here to let us know what you thought.


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34 Comments on "Silver Striker: Massive Silver Mine Running Beneath Great Wall?"

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Bill Downey
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January 18, 2010 4:51 pm

Silvercorp looks great on the chart, is in a great uptrend, up big this year. Buying on pullbacks at the 5.60 and 4.20 area would be a great place to accumulate long term. Gumshoe is correct, many have touted this stock. May you all prosper.

Bill

Oldfool
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Oldfool
January 18, 2010 5:09 pm

I bought SVM the day after Matt Badiali touted it. It’s up about 105% since then. I guess I’ll hang on somewhat longer here on SVM. I had not read about this current event, but then, I don’t get to the “ol computer that much. Thank you Gumshoe, for doing a fantastic job on your sleuthing. I have recommended you for at least a year to anyone that will stand still..

Bill C
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Bill C
January 18, 2010 5:25 pm

Here’s one problem with the scenario– if the supply of something goes way up, the price of it goes down. If there really is that much silver to be mined out of that part of China, then there is a chance that the price of silver could take a hit. So, has anyone done the math regarding what would happen to the company’s worth if silver takes a hit on the confirmation of all that silver reserve?

pcolajoe
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pcolajoe
January 18, 2010 5:27 pm

SVM is cheap right now too. Not as cheap as what i sold it at last year, but a good price. I got this ad also and thought it sounded like svm, thanks for the confirmation.

Wesley Kalisz
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Wesley Kalisz
January 18, 2010 5:40 pm

This is very interesting

Dave
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Dave
January 18, 2010 5:54 pm
Haven’t run the numbers yet, but if Ted Butler is correct, there is a huge silver shortage above ground and perhaps, just perhaps, limits are going to be put silver and gold contracts. If that looks like it might actually happen, the silver shorts might cause silver’s price to soar. If it actually happens, SILVER WILL SOAR. No matter what I think it is a good company to own–unless silver prices completely collapse. I own SVM. I bought on Matt Badali’s reco and am up considerably. I also own some shares in a covered call situation. I am making money… Read more »
Dave
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Dave
January 18, 2010 5:55 pm

Oh, the last sentence–WITHOUT the covered call is how it should have read.

John Mattingly,farmer John
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John Mattingly,farmer John
January 18, 2010 7:24 pm
I bought Hecla Mining Co up here in Creede, Co a year ago at $1.50 and it’s over $6.00 now, has been close to $7.50. Because the Co is doing exploratory work in our region, I’ve spoken with management and they are a solid organization with good management. Not that I’m recommending Hecla, it’s just nice to be able to talk to the people who run it. They told me one of the big obstacles in the US is lack of smelting capacity, most of which is now in Mexico. Also, the by-products of silver mining, lead and especially zinc,… Read more »
Adrian S
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Adrian S
January 18, 2010 8:31 pm
I had held SVM for the long haul from before they were even known as Silvercorp (they used to be called SKN Resources and I paid 50c before the 3:1 split). However I sold the bulk of my holding a couple of years ago after the company (in my opinion) overpaid for an asset which they bought from the Chairman and his family. I thought the deal stunk, so I sold up and I haven’t trusted the management since. I finally sold the rest of my holding after the shares recovered a bit from their lows last summer – obviously… Read more »
kelvin
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kelvin
January 19, 2010 4:33 am

just a note of caution. Silver trade has a lot to do with the computer, electric, industry and if the much heated China bubble burst happens Silver prices could collaps.

Teds been ramping silver for years and has made money – however that was in the good times when things were humming. Right now china has massive unemployment and factories are closing by the thousands. Less demand less price. CAREFULL

Tom Szabo
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January 19, 2010 5:34 pm
There is no worry from collapse of industrial demand for silver, the new uses (batteries, solar, etc.) will at least offset any loss from traditional uses. Instead, the main driver for silver going forward is physical demand. With respect to the tease by “Sound Profits”, my main issue would be the extreme hype over the upside profit potential as well as the ridiculous notion that Silvercorp. have discovered billions of ounces of silver. The reader is being misled by the “stretches for 186 miles” to believe this is essentially a lateral strike whereas in reality we are talking about the… Read more »
Myron Martin
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Myron Martin
January 25, 2010 6:12 pm
Is anybody else as disgusted as I am with the MISUSE of the word FREE in newsletter promotions? I have been trying for months to get the whole family of AGORA affiliated editors to STOP abusing this misleading term to suck people into reading their over hyped promos for a plethora of new services. The term FREE means “with no strings attached” so if you have to pay even a penny to get it then it is by definition NOT FREE! A few days ago I read a promo from an Agora affiliate that promised a year of _ _… Read more »
Lone Ranger
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Lone Ranger
February 8, 2010 9:12 pm
I wrote in some many, many weeks ago that studies particularly by the Elliot Wave Theory guys had silver falling from about $17.50-$18.50 (then) or so to way below $8.50 or so. I suggested [I think] that it was more likely the ETF ZSL [which moves opposite to silver] would be the winner for the next 9 months. So I am gosh-awful lucky to be up about 50% at the moment. My point is, when the Wave people get it right, you are spitting in the wind to bet against it. So silver is running a really nice Elliot Wave… Read more »
Len Aaron
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February 20, 2010 10:27 am
SilverCorp Metals (SVM) is right up there with Silver Wheaton (SLW) Silver Streaming Royalty Co. as lowest cost silver producer in the world. Both get their massive increasing piles of Silver for ~$3/OZ!!! Chart SLW vs SLV to see its SkyRocketing price highly leveraged to today’s current (manipulated) paper silver prices. JPMorgan is a major shareholder in SLW, despite holding the most massive and illegal manipulative Silver Short Position in the entire world. The biggest difference is that SLW is already very high on the Wall St. Radar; whereas, SVM is still flying almost completely below radar: at least for… Read more »
Zhang Zhiwen
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Zhang Zhiwen
February 22, 2010 3:04 am

How come the a mine under the Great Wall can be humdreds of miles south of Beijing??? Impossible, if you know where the Great Wall locates.

stockcrazy10
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stockcrazy10
February 22, 2010 12:18 pm

Silvercorp to Acquire Advanced Stage Silver-Lead-Zinc Project in British Columbia, Canada

http://www.silvercorpmetals.com/news/index.php?&content_id=218

Gdubu
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Gdubu
March 13, 2010 10:26 am

Most everyones comments here seem to be ‘trader’ oriented. If you believe as I do that the commodity bull has a long way to run and that tech innovation in addition to the BRIC countries will rule the day ( Even though the market will most likely will hurt before it starts to feel better ), than SVM is an excellent bet IMHO. Does anyone know if the Chinese are likely to take a large ownership position in SVM as they did with Jinshan? I am long Jinshan and now long SVM.

Len Aaron
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March 22, 2010 10:11 pm

I believe THE CHINESE GOV'T is already a major Owner and Partner with SVM.
News of SVM diversification into the Advanced Stage BC Project mitigates risk.

Jinshan (JINFF) is a multiple bagger for me thus far, but SVM looks better now.
With Industrial & Medical uses for Silver increasing, "Poor Man's Gold" is Best.
If Anyone has any information about China's Partnership with SVM, Please Tell.

From what I see, SVM Call Options (decent time horizon) seem like a "no lose".

Happy Investing!!!

Russ
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April 5, 2010 5:18 am
Hi!, Fellow Posters: A thought: If there's billions of troy ozs. of silver in China & a huge above ground shortage, what if those mining their silver reserves take their time & don't flood the market which keeps a shortage in place? Some miners sell hedge positions that lock them into delivering their goods; while others don't sell their goods forward into the futures market which means that there will be many influences influencing how all this pans out over the next decade or so, as the bull maket in precious metals unfolds doesn't it? Just thinking outload! Russ, California… Read more »
Myron Martin
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Myron Martin
September 3, 2010 5:43 pm
I wonder how the gentleman who postulated 7-9 months of decline for silver feels now? If you are going to make intelligent investments then you need to do your homework and listen to ALL aspects and get ALL relevant information not just listen to one opinion and act on it. No doubt many people would avoid investing in China because of the "communist bogeyman" but while the government is still bureaucratic (aren't they all) and focussed on central planning, the fact remains the Chinese are very intelligent people , hard working and great entreprenuers. They are also great capitalist and… Read more »
Brian
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Brian
September 29, 2010 10:03 pm

It could be New Pacific Metals Corp

Brian
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Brian
September 29, 2010 11:34 pm

The Silver Striker could be New Pacific Metals Corp

Peaceful Warrior
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Peaceful Warrior
October 1, 2010 8:06 pm
Here's what in my opinion has the potential for greatness within the next couple of months. Genco Resources (TSX:GGC) Genco is a Mexican Silver miner turnaround story. This was previously a $4 stock, when a few years ago, it was mining Silver profitably. Because of politics and other issues, the stock has declined to where it is today. Recently with management changes, a new NI 43-101 compliant technical report and feasibility study completed the company’s fortunes are improving. On September 20, 2010, Silvermex Resources (SLVXF, TSX:SMR) offered a merger with the company. Here is the interview with the CEO done… Read more »
JamieN
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JamieN
October 15, 2010 9:45 pm

What a bunch of B.S.. Really, think about this. "silver strike stretches 186 miles. It could contain, by our estimates, 30.2 billion ounces of silver."

Bigg Fredd
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Bigg Fredd
October 16, 2010 9:40 am

Nothing wrong with the statement, but that's an awful lot of real estate to dig thru, I don't care HOW much silver is in it.

Bigg Fredd
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Bigg Fredd
October 23, 2010 10:01 pm

How much gold is in the ocean? They've calculated it. Now do you see people lined up to remove it?

Even if there IS 30.2 billion ounces of silver, what will it take to dig up 186 miles, even if the vein is only 10 feet wide and 10 feet deep?

rick386
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rick386
January 18, 2010 6:07 pm
I don’t think it’s all that cheap, p/b of 5.9. It is under the industry average. I thought it was cheap enuff half a year ago when I bought at about $4.50. I’m up 50% and haven’t sold any yet…..I give it a price target of $8.50, and I run away. If it hits 8 again, maybe I’ll sell 1/2. What I do like about them is their debt, which is none to speak of. If you want to take the cheap road, this silver miner has options, and they’re resonable. A straddle might get you in for free with… Read more »
Cathi
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Cathi
September 17, 2010 7:29 am

I had that same thought!
Wouldn't it be wise to invest in the company? Since they'll probably go big, for a while…
Wait and invest in silver when it's price drops significantly, sell later….?

trader
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trader
January 18, 2010 8:12 pm
Farmer John, AOD is terrific. Management specializes in the “dividend capture” technique, and that’s a good, systematic way to get superior dividend returns. Only big downside I see to AOD now is that it’s trading at a large premium to NAV. According to http://www.cefa.com, AOD’s NAV as of 15-Jan-2010 is $7.21, so it’s currently trading at a premium over 25% above NAV. Just a red flag, not something to panic over. Some closed-end funds trade at a NAV premium “forever”, others at a discount forever. But most eventually do both, so I certainly prefer to buy more when it’s trading… Read more »
John Mattingly,farmer John
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John Mattingly,farmer John
January 18, 2010 11:41 pm

Thanks for the helpful thoughts.
With the dividend, though, now at .12 a share (was .18 when I bought) in a year or so, would you consider it to have made up the premium?

trader
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trader
January 19, 2010 1:52 pm
John, even at its “inflated” market price and after the dividend cut, AOD is still yielding over 15%/year. I’m not buying more while the premium over NAV is so high, but I’m not selling either until the yield falls closer to 10%. In the meantime, it’s a no-effort, conservative way to collect over 15%/year. In fact, at my AOD cost basis it’s yielding about 23%/year for me, and I suspect it’s similar for you! IOW, I’m not holding AOD for capital appreciation anymore (the current premium over NAV is too high to make that promising), but for the high income… Read more »
John Mattingly,farmer John
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John Mattingly,farmer John
January 19, 2010 8:41 pm

Trader,
Thanks for the helpful advice. I retired from farming last February and invested at that time and things have worked out pretty good. I actually made more money in 8 months than I’d made all my life farming, but I never mistake luck for skill, as over the last 55 years I’ve done the same things at different times and had very different outcomes. I have other questions about investing and, if you’re a good enough neighbor to give me a few more pointers, I’d appreciate it.
John

Gravity Switch
Admin
11
September 30, 2010 9:24 am

New Pacific is partly owned by Silvercorp, but is not itself a silver miner (they're searching for gold in China and BC, Canada).

JamieN
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JamieN
October 23, 2010 6:28 pm

Nothing wrong with the statement? Really, what if I told you there was as much platinum that was ever minded underneath the Great Pyramid? Would you believe that too?

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