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Gold vs. silver –Silver has been known as the “poor man’s gold.” Silver used to be treated as a monetary metal. No more. Today no central bank holds silver as part of their reserves. However, silver has an historical relationship to gold. The historical average is that one ounce of gold would buy around 15 ounces of silver. The ratio is now out-of-whack at around 69, which means that compared with gold, silver is “dirt-cheap.” Richard Russell

Silver is closing higher last week at 18.25. Silver has alternated between up
and down weeks for the past 7 sessions. It is interesting to note the 7 week
moving average is near at 18.30.  Silver lacks direction, but Gold is in a bull
trend, so we would expect the Gold Silver ratio to drift higher. The Gold Silver
ratio has actually dropped this week from 69.64 to 67.27. The ratio has
alternated in direction for the pasfor a move higher next week. – Scotia McLeod Gold & Silver Marketwatch From Commodity Online – Silver is closing higher the week at 18.25$. Silver has alternated between up and down weeks for the past 7 sessions.

It is interesting to note the 7 week moving average is near at 18.30$. Silver lacks direction, but Gold is in a bull trend, so we would expect the Gold Silver ratio to drift higher.

The Gold Silver ratio has actually dropped this week from 69.64 to 67.27. The ratio has alternated in direction for the past 6 weekly sessions so if this continues look for a move higher next week.

An unprecedented crisis in the silver marketcould easily hand you a long series of double… triple… even quadruple investment gains.

Here’s how…

You probably already know that every commodity fortune ever made was created by an imbalance of supply and demand.

When the demand for a certain commodity is high and supplies are low, prices skyrocket. And investors holding the commodity in question get rich.

This is exactly what has happened in the case of many natural resources just in the past decade alone:

• Crude oil shot up 620% in 6 years
• Gold is now up over 380% since 2001
• Natural gas soared more than 550% in 4 years
• Uranium spiked 830% in 4 years
• Copper increased nearly 530% in 7 years
• Palladium more than tripled in 3 years
• Platinum prices grew 430% in 6 years
• As demand grew and supplies dwindled, the prices for these natural resources ballooned in value.

But none of these commodities experienced the supply/demand crisis that silver is currently facing.

Take a moment to chew on this…

According to GFMS Limited — the world’s leading authority on precious metals markets — the total amount of above-ground silver supplies dropped by 86% last year.

This left the world with just about 20 million ounces of silver reserves.

At the same time, the world demands about 2.5 million ounces of silver per day.

That means the entire global supply of above-ground silver could be completely wiped out in just eight days!

Fortunately, silver production companies have been able to keep up with demand — but just barely…

Last year, silver miners were only able to increase production by just over 3%. And for the past 10 years, there has been no surplus in silver supplies.

This extremely tight supply/demand dynamic of the silver market has been terrific for investors that own the physical metal. Silver prices have increased nearly 350% since 2002.

But shareholders of the companies that pull the silver out of the ground have done even better. Here are three recent…

Silver stocks beating the markets

Silver Wheaton is the largest precious metals streaming company in the world. The company has thirteen long-term silver purchase agreements and two long-term precious metal purchase agreements.

These agreements allow the company to purchase all or a portion of the silver production at a low fixed cost from high-quality mines located in Mexico, the United States, Greece, Sweden, Peru, Chile, Argentina, and Portugal.

For 2010, Silver Wheaton expects to produce 22.2 million ounces of silver and 20,000 ounces of gold, for a total production of 23.5 million ounces of silver-equivalent.

By 2013, annual production is expected to increase significantly to 38 million ounces of silver and 59,000 ounces of gold, for total production of over 40 million silver-equivalent ounces.

Pan American Silver is the second largest primary silver producer in the world. The company owns and operates eight silver mines and four development projects in Peru, Mexico, Bolivia, and Argentina.

Pan American’s growth strategy is based on the continued increase of low cost silver production through the efficient operation and expansion of its existing mines, an aggressive exploration program, and the acquisition and development of new silver-rich deposits.

The company has increased silver production by 105% since 2004. Last year, the company produced 23 million ounces of silver from its Latin American assets. For 2010, the company anticipates increasing production slightly to 23.4 million ounces.

According to the latest estimates, Pan American Silver has 234 million ounces of silver reserves and 940 million ounce of resources in the measured, indicated, and inferred category.

The company also mineral reserves of 679,000 ounces of gold, 717,000 tonnes of zinc, 302,000 tonnes of lead, and 67,000 tonnes of copper.

Fresnillo plc is the third largest silver producer in the world and Mexico’s second largest gold producer. The company operates four producing mines and one development project, all located in Mexico. In total, Fresnillo has mining concessions covering approximately 1.75 million hectares across the country.

One of the main drivers of Frenillo’s growth is the investment in exploration and the development of projects and prospects with the potential to become low-cost operating mines. The company’s disciplined approach to investment includes the evaluation of economic ore grades, maximum extraction costs, and an established reserve base.

In 2009, Fresnillo increased silver production by 9% to a record 38 million ounces. The company also increased gold production by 5% to 277,000 ounces.

The company plans to bring one new mine into production each year until 2014. As a result, Fresnillo anticipates increasing silver production by another 50% to over 56 million ounces in the next four years.

In my most recent Wealth Daily report, I give details on another company that is expecting to ramp up silver production this year by 66.7%.

This increase in production is expected to boost quarterly operating cash flow by over 650%, which is exactly why the world’s biggest investment and financial institutions have been hoarding this stock.

To read my latest report for free, simply click here.

Good Investing,

Luke Burgess
Editor, Wealth Daily
Investment Director, Hard Money Millionaire

Silver is undeniably one of the most favoured investment vehicles for the top minds in the industry. From its ability to rise with a growing economy, to a precious metals hedge against inflation, silver is a metal with many talents.

Over the past six months, we have tracked the performance of many of the silver miners and explorers – our favourite way to play the silver boom.

Many silver stocks have increased dramatically since the beginning of this year. As a matter of fact, one company featured in our past Special Report Edition increased almost 100% in just two short months. However, despite a strong run, many silver stocks have recently experienced a strong sell off.

With the exception of one:

Minco Silver Corp (TSX: MSV)  (OTCPK: MISVF)

Looking for the right company is like finding a needle in a haystack or being a kid in a candy store. Whatever figure of speech you use, it’s just plain difficult – especially in this market.

But if you are looking for a pure silver play, no company makes more sense to us than Minco Silver Corp (TSX: MSV)  (OTCPK: MISVF). We’re not the only ones who think so.

The Largest Pure Silver Play in China?

Experts at both Raymond James and BMO Capital Markets have buy ratings for Minco Silver and both believe that the next few months may “potentially be a company-changer.”

BMO just upgraded Minco Silver with a target price of $3.00, while Raymond James has a target price of $3.35, with a NAV (Net Asset Value) of $4.26/per share. Target prices from large institutions are often very conservative, factoring in every possible risk.

But as you will read later, these target prices could easily be raised if Minco Silver achieves a very important milestone – one both BMO and Raymond James expects to happen anytime now.

This milestone has the potential to make Minco Silver the largest pure silver play in China – an incredible feat when you consider China`s prowess in commodities.

More on this later.

The Fuwan Silver Project

Minco Silver (TSX: MSV) (OTCPK: MISVF) is a pure silver play with a 43-101 resource of 158 million ounces* in their Fuwan Silver Project in Guandong, China.

Fuwan is a world-class silver deposit located on the Fuwan silver belt – a belt with a strike length of 10km. It has  significant potential for expansion as it encompasses over 200 km2, of which less than 2% has been drilled to date.

The silver zones of the Fuwan are shallow (250-450m deep), high grade, flat-lying, strata bound, with a total strike length of 2.8 km.

Contiguous with the Fuwan deposit, Minco Silver and its sister company Minco Gold have already delineated several deposits within the district totalling 180Moz of silver and 1Moz of gold.

Infrastructure

The location of the Fuwan silver project makes it very attractive and translates into very low capital requirements when compared to other mines of this size.  

It is accessible by paved highway and nearby waterway. Power, water, fuel and supplies are also easily obtainable. The property can also accommodate everything required for a mine including tailings dam, waste disposal, and processing plant sites.

The majority of reserves and resources (~60%) are contained within two zones which will reduce mine development requirements – saving money for Minco Silver and adding even more value to shareholders.

Take it to the Bank

Of the 158 million ounces that Minco Silver owns, 55 million ounces are reserves.

Unlike your standard indicated and inferred resource, reserves are resources that you can literally take to the bank and use as collateral for financing.

Minco Silver has already completed a “bankable feasibility” – this means their project is both profitable and makes sense (see Taking the Next Step for info on feasibility studies).

Based on the results of a Q4/09 feasibility study managed by Wardrop Engineering, the Fuwan deposit is expected to produce an average of 5.5Moz of silver at cash costs of US$5.65/oz over a 9.2-year mine life based on a 55.4Moz silver reserve. That means that Minco Silver is expected to produce close to $100 million in revenue and over $69 million net profit with current silver prices.

To give you an idea of what 5.5Moz could mean for Minco Silver, let’s use Silvercorp Metals (TSX, NYSE: SVM), a primary silver producer in China, as a comparable. In 2009, Silvercorp pulled close to 4.2Moz of silver out of the ground and is forecasted to pull just over 4.6Moz in 2010. They have a current market cap of ~$1.15 billion. That’s more than 10 times Minco Silver’s current market cap of just over $110 million!

If production commences, Minco Silver will have annual revenues nearing its own current market cap. Don’t forget that this forecast is based on only 55.5 million ounces, and not the total resource of 158 million Minco Silver has already found.

Bankable feasibilities take time and a lot of money. Not only has Minco Silver accomplished this, they have done this without major dilution and without incurring debt.

Moreover, they have $21 million dollars in the bank, and another $2.75 million in interest payments is expected to fill their treasury soon.

Minco Silver is already a great story when you consider it has a bankable feasibility study, no debt, $21 million dollars, and just over 50 million shares outstanding on a fully diluted basis.

But the real upside to this story lies in something that is expected to happen at anytime…

Timing is Crucial

Minco Silver (TSX: MSV) (OTCPK: MISVF) is on the brink of a very historical milestone – the same milestone that helped propel Silvercorp’s share price through the roof: the receipt of their EIA (environmental impact
assessment) permit from the Chinese government.  

To give you an idea of how big this is, take a look at the price performance chart for Silvercorp below:

As you can see in the above chart, Silvercorp’s share price slowly increased as they moved toward the EIA approval – very much like Minco Silver has to date. This is a very similar situation and is a sound reason why Minco Silver has gained in share value over the last few months, while other silver companies have dropped.

You can see how Silvercorp’s share price continued to increase substantially following the receipt of their EIA approval – more than tripling in share price in a few short months and continually climbing in the subsequent years.

Once Minco Silver receives this permit, the Mining permit is simply a formality and should follow shortly – as was the case with Silvercorp, who received their mining permit a few short months after their EIA approval.

Minco Silver already has the following approved:

• Chinese exploration report approved by MOLAR (Ministry of Land and Resources)
• Chinese Feasibility Study
• Project Approved by Gaoming county government
• Soil and Water Conservation Plan
• MAP (Mining Area Permit) approved by MOLAR
• Land use permit
• In essence, the receipt of their EIA permit is more of an administrative formality than anything.

But we know permitting processes are often intertwined with political and social roadblocks – especially in a country like China.

But that’s where Minco Silver shines.

At the helm of Minco Silver is Dr. Ken Cai, a Chinese national who has been the driving force behind many property negotiations in China.

Not only that, he has a wide range of high-level contacts in the Chinese mining communities and this has allowed Minco to access data on a large number of projects throughout China.

Speaking from personal experience, Minco Silver’s Dr. Ken has some serious connections in China. He not only has the right contacts in the Chinese government, but has structured Minco Silver in a way that will allow them to operate as a Chinese company – a very important step if you want to operate a large scale mine in China.

It takes some due diligence to understanding the intricacies of what Dr. Ken Cai has done. But we can assure you, from our personal experience with other public companies, that no other company has been able to do what Minco Silver has.

But don’t just take our word for it, see what the large institutions have to say:

“We believe Minco Silver offers a compelling buying opportunity given that critical catalysts and milestones (final permitting, financing, etc) are merely months away…” – Raymond James, April 2010

“Given the larger footprint of mineralization at Fuwan, BMO Research views the prospects of both an increased mine life and future expansion through consolidation of the Fuwan camp as realistic.” BMO Capital Markets, February 2010

Both BMO and Raymond James are expecting Minco Silver to receive their EIA permit anytime now. That’s perhaps why Raymond James is calling 2010, Minco Silver’s “company-changing year.”

One quick glance at Minco Silver Corp (TSX: MSV) (OTCPK: MISVF) and you can clearly see what it has over other companies:

• one of the lowest shares outstanding compared to its peers with a tight capital structure
• $21 million in the bank with no debt
• 43-101 resources of over 150 million ounces, with 55 million ounce probable “reserves”
• Coverage and buy targets from large financial institutions such as Raymond James and BMO Capital Markets
• A potential takeover target, as mentioned by BMO
• On the verge of a historical milestone at any moment

With an estimated float of 11 million shares, Minco Silver (TSX: MSV) (OTCPK: MISVF) has done a great job of attracting institutions but have yet to realise its retail capabilities. With such a small float, retail investors will be playing catch up with the institutions if Minco Silver receives their EIA permit.

Minco Silver is expecting to receive their EIA permit anytime now. When this happens, it will spell big rewards for the Company and its shareholders.

Minco Silver could be on its way to becoming one of the largest pure silver plays in China…

Minco Silver Corporation

Cdn Symbol: (TSX: MSV)
US Symbol: (OTCPK: MISVF)