MINCO gold and silver explorer.... the facts

The Monthly Company and Market Round-Up (Part 2) from GE&CR on UK-AnaIyst.com Date: Wed, 07 Sep 2005

We initiated coverage of AIM listed Minco on August 10th 2005 at 13.75p with a buy stance. The shares now trade at 14.5p.

Minco was floated on AIM in 2001 by serial Irish entrepreneur John Teeling as a play to explore for zinc and, to a lesser extent, gold in Ireland. In July 2003 the all-paper acquisition of Orca Gold passed control of the entity to Roger Turner and Matthew Dorman and shifted the focus of the company to silver exploration in Mexico. Minco's lead project is a tailings recovery process at Laguna Zacatecana where a bankable feasibility study should be completed in the third quarter of 2005 and where production should commence in 2006. We believe that the Net Present Value of this scheme to Minco is worth at least 22p per share.

Minco also has a 50% stake (with the scope to attain full ownership) in the Minera Sisa exploration project also in Mexico. Early drilling results on the silver/gold/copper concession have been encouraging. Of the Irish inheritance from the old Minco, the asset with the greatest upside is the Pallas Green zinc exploration project where Minco has a 23% stake in a joint venture with Noranda which is undertaking a 9,000 metre drilling campaign during 2005. The first results of this campaign were published in August and were very encouraging, suggesting that Pallas Green may have economic potential. However, more work is needed.

However, the appeal of Minco is its Mexican silver assets which underpin a valuation significantly in excess of the current share price - our fully diluted valuation is 27.3p per share - and offer the prospect of generating significant cashflows from 2006. Minco is the purest "silver play" on the London market and on the basis of Laguna on its own it is significantly undervalued. Our stance remains buy.