The Future of Metalline Mining Company
David Zurbuchen
market capitalization in excess of 1 billion dollars. This translates into a share price between
$10-100, ten to one-hundred times higher than it trades at today. This potential may seem
unreal, but it has happened many times before. Take TASR for example, a stock which rose from
$.31 to over $32/share in only 2 years!
Here is the one year chart of Metalline Mining Company, symbol MMGG.OB:
long consolidation period between Nov.04-Sep.05 has and is setting the stage for a huge
reversal. The volume level was extremely low in July, when the stock was also bottoming out, and
it looks as if the volume is soon to pick up again. Here is the expanded chart beginning in Jan 01:
technical/psychological support here as this was the price many insiders paid for their shares.
Since it isn't likely than insiders will be excited about selling their shares at a loss, I don't anticipate
much downside risk from here on out.
One of the main reasons for the low volume, is the low volume. Such a situation causes stocks
like this to trade with a very large bid/ask spreads, sometimes as much as a $.15 cent
difference! This means that if you want to sell in a hurry, you're looking at a 15% loss. As
unsavory as it is to watch for those who hold on through the decline, it is that much greater for
those who are patient enough to wait it out or are lucky enough to get involved at the end of the
slump. This is due to the to the fact that in such a consolidation phase, shares tend to move into
stronger and stronger hands, as day-traders and short-term speculators avoid the stock like the
plague because of the large spread. These reasons alone ought to be enough to pique the
interest of the sidelined investor who is interested in tremendous long term potential.
But after all, chart reading should never determine an investment. What ought to determine an
investment is real value. The trick is figuring out how accurately the current share price reflects
that value and then investing accordingly. I'm sure you remember learning in physics how 'fluids
seek out their own level'. The same general rule applies to investments, so let's seek out that
level for Metalline Mining Company using all the information available.
Shares Outstanding: 19.93M
Market Capitalization: 19.93M at $1/sh.
Outstanding Debt: 13.68k
Total Cash on Hand: 590.21k
Before going any further, it is necessary to briefly outline the history of the company, in order to
understand certain value calculations, and some of the risks involved.
Metalline Mining is still in the exploration stage, though they are well on their way towards the
completion of their feasibility study. Once the study is completed, construction of the mine can
begin which will one day be able to exploit the prolific silver, zinc, copper, and lead deposits in the
district of Sierra Mojada pictured below. Located in the state of Coahuila, Mexico, Metalline
Property (100% title ownership) consists of concessions that total 7108 hectares (17,563 acres).
Since the turn of the 20th century, large amounts of high grade copper and oxide zinc
mineralizations have been discovered here. Such high grade deposits, in fact, that in the history
of the district there has never been the need for a mill to concentrate lower grade
mineralizations! In other words, this is some 'rich' property.
survey and drilling programs.
The most recent drilling program which began in January of 2004, has since been evaluated by
Reserva International. The results showed that using a 5% cut off grade (using grades greater
than 5%) and with blocks of 5 meter dimensions, there would be an "estimated 17,926,988 metric
tons with a grade of 8.78% zinc for the Iron Oxide Manto and 5,431,050 metric tons with a grade
of 12.08% zinc for the Smithsonite Manto".
Based upon these results, Metalline has since commissioned a feasibility study through Green
Team International. The expected cost is $5 million. GTI was chosen partially due to their
experience conducting the feasibility study on the Skorpion Mine, which is currently the only mine
in the world extracting Super High Grade zinc (99.995% zinc) from zinc ore using the solvent
extraction electrowinning process. This process, also to be used by Metalline, allows for a 30%
lower cost/pound of extracted zinc than when using the usual pyrometallurgical process ($.25 vs.
$.35). The Company anticipates that by using this newly discovered technique, that Metalline has
the potential of becoming a world premier zinc mine. In fact, the president of Metalline made the
statement that if electrowinning is capable of being used in the Sierra Mojada district, then
Metalline could become “one of the largest zinc mines and one of the lowest cost producers in the
[worldwide] zinc industry.”
Using the results of the study begun in January 2004 (remember, this is deals only with the oxide
zinc mineralizations), there are about 18M metric tons of 8.78% zinc and about 5.5M metric tons of
12.08% zinc.
.0878 (grade %) x 18M (# of metric tons)=1,580,400 metric tons of zinc and
.1208% x 5.5M metric tons = 664,000 metric tons of zinc.
Together the total sums up to 2,244,800 tonnes of zinc in the 2 explored areas of Sierra Mojada.
With the estimated production cost of $.25/lb zinc and the current market price of $.64/lb,
Metalline would command a profit margin of $.39/ton.
The mining infrastructure Metalline plans on building within the next 2-4 years, would extract
180,000 metric tons of zinc metal annually.
One metric ton is equal to 2,204.622 lbs., therefore, this equates to the production of
396,831,960 lbs. zinc annually.
Multiplying this number by the profit margin of $.39, yields the staggering amount of
$154,764,464.40 profit per year.
Dividing 2,244,800 (the total amount of zinc in Sierra Mojada) by the amount of zinc annually
extracted gives more than a 12 year lifespan for the mine.
Using a conservative P/E ratio of 10, we find that $154,764,464.40 x 10= $1,547,644,644. This is
the potential future market capitalization of Metalline Mining Co. Currently, Metalline's market cap
is less than $20M.
Such a Market Cap would dictate a price/share of $77!
Even if the stock to be diluted beyond the level currently allowable, and 80M more shares were
issued in order to raise the costs associated with building the mining infrastructure ($250M), this
would still yield a price of about $15/share. Indeed, even if the stock were diluted to 300M
outstanding shares (something extremely unlikely as financing should easily be completed at a
much higher price than $1/share), the price should settle around $5/share.
None of these calculations even begin to consider the large high grade silver and copper deposits
present within the district. Also, these evaluations only account for the 1st year of production,
meaning the share price should continue to rise significantly every year thereafter.
Finally, Metalline Mining is of the opinion that there is exploration potential beyond what has thus
far been discovered in the Sierra Mojada Project, meaning that the growth of the company's
assets would continue even while the mine was in operation. And once in operation, presumably
making over $100 million profit every year, Metalline would most likely never again need to dilute
the share count in order to raise the funds necessary to exploit these new mineralizations.
Part 2: More Production Soon, or Zinc Prices Go to the Moon!
silverinscripture.com
Disclaimer:
*This material is not copyrighted, and I encourage its reproduction as long as my name and website are
mentioned. I own stock in Metalline Mining Co., but they have not compensated me in any way to write this report.
Make sure you do your own due diligence before investing in any stock or commodity. I am not a financial
advisor.