MINCO gold and silver explorer.... the facts

6th November 2005

Minco Resources

We initiated coverage of AIM listed Minco on August 10th 2005 at 13.75p with a buy stance. In September the positive news was from Eire, in October the much more significant and positive news came from Mexico and although the shares now trade at 15.5p they fail to discount the underlying value in this company.

Minco was floated on AIM in 2001 by serial Irish entrepreneur Dr 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.
Key Data
EPIC MIO
Share Price 15.5p
Spread 15 - 15.75p
NMS 15000
Market Cap. 21.3 million pounds
12 Month Range 10.75 - 16.5p
Market AIM
Website www.minco.ie
Sector Resources
Contact Matthew Dorman
0207 397 8150


Minco's lead project is a tailings recovery process at Laguna Zacatecana where a bankable feasibility study has now been completed by Micon. It suggested that the capex needed for this project was $21.6 million and that using a 10% discount rate it had a base NPV of $23.9 million and an upside valuation of $30 million and that production should start in 2006. This study does not encompass tailings from around the lake and hence our estimate of the NPV of Laguna is higher at 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. Results published in August and September were very encouraging and Noranda now has four rigs on site and is accelerating its exploration plans for 2006. If Pallas Green does appear commercial we believe that Minco will look to realise the value of its shareholding and we believe that this, alone, could easily be worth 8-10p per share to the company.

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 (with Pallas Green accorded a minimal value) - 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 s