MMG

[VikingFan]

Zinc Overview
From the Metalline Mining Web site (http://www.metalin.com/zinc_solvent.html)

"Zinc is one of the most useful and essential metals. Zinc's primary use is corrosion protection in the galvanized steel industry. The recycle life of galvanized steel can be up to 100 years and the added cost is justified by decreased maintenance cost over ungalvanized steel.

The largest use of galvanized steel is in the automobile industry and in commercial and residential construction. Construction is zinc's fastest growing sector where it is used, for Structural support, as galvanized electric power, microwave, cellular and other towers, steel beams, floor joists, studs and trusses and it is used in ductwork, roofing and decorative interior and exterior covering.

Die cast zinc parts are used in automobiles, appliances, tools and computers.

Zinc alloys with copper, tin, lead, aluminum and magnesium are used in the construction, automotive, electrical and consumer products industries. Other zinc uses are in batteries, tires, rubber goods, paint pigments, ceramic glazes, cosmetics, pharmaceuticals and chemicals.

Zinc is an essential nutrient for all life, plant and animal and is used in the food industries, nutritional supplements, animal feed and fertilizers.

Zinc consumption has grown dramatically over the past 30 years and continues to increase and new uses for zinc are being developed. Zinc fuel cells are under development for generating electricity and could create significant new demand."

Zinc Supply Gap
Following several decades of ample zinc supply, a major supply gap is developing in the zinc markets that will likely have a profound impact on future zinc exploration and mine development (from http://www.yukonzinc.com/zincMarkets.htm):



China has been a main driver behind the supply gap, as they've gone from a major exporter of refined zinc to a major net importer in 2005.

As you can see from the below chart, the London Mercantile Exchange Zinc Warehouse Stocks Level decreased by over 37.5% in 2005, indicating the zinc shortage is getting worse quickly (live zinc charts at http://www.kitcometals.com/charts/ZINC_historical.html):



As the zinc supply shortfall worsens and inventories continue to decline, the price of zinc increases. You can see from the below chart that the price of zinc has more than doubled in the last 18 months:



Unlike other commodities, there are few giant zinc deposits in inventory to fill the gap due to depletion of reserves during the past several years of low zinc prices. While old reserves get depleted, no new large zinc mines are set to come into production in the next two years.

Metalline Mining Zinc
The Skorpion mine in Namibia, Africa, is the 8th largest zinc mine in the world. In 2003, the Skorpion mine became the first mine to use the Solvent Extraction Electro-Winning (SXEW) to produce refined zinc from oxide zinc. The cost of producing refined zinc by SXEW is $0.25 per pound, a 30% advantage over the rest of the zinc industry, which produces zinc from a sulfide concentrate through the smelter process at a cost of $0.35 per pound. This new technological advance has made Skorpion the world low cost zinc producer.

Using the same SXEW process as the Skorpion mine, Metalline Mining's Sierra Mojada mine in Mexico could be one of the world's 10 largest zinc mines and one of the lowest cost producers, and possibly the lowest cost producer. With a similar cost to Skorpion's $0.25 per pound, Metalline would have a margin of over $0.60 per pound at the current zinc price of over $0.85 per pound. With zinc prices likely headed much higher given the aforementioned supply gap situation, the profit potential for Metalline's zinc reserve is enormous.

Feasibility Study
After discovering mineralization and doing extensive drilling to show the presence of enough marketable metals to move forward, mining companies go through a feasibility study, a process to define the metals reserve (metallurgy), define the costs and profitability, get regulatory approvals, and design the mine (and refinery in cases where that step is included). The feasibility study provides the extensive proof that the mine will make money, and is used for financing to go into production. Typically, this financing comes from a takeover by a major mining company, a joint venture with such a company, or a combination of bank debt financing and equity financing.

Metalline Mining began the feasibility study process about a year ago, proving they had over $4 billion of Zinc earlier this year in the metallurgy portion. The feasibility study has stalled in recent months because of a lack of funding, which Metalline is addressing with the current private placement. Once the financing is complete (likely in the next couple of weeks), the feasibility study should be complete within 9 months to a year. The cost of building a mine and extraction plant is likely to be in the $250 million to $400 million range.
To conduct the feasibility study, Metalline selected Green Team International (GTI), the same company that conducted the feasibility study on the Skorpion mine. GTI designed, supervised the construction, and operated the Skorpion mine and extraction plant through initial production and until the mine and plant were at 90% capacity. Given Metalline's plan to use the same efficient, cost-saving process as Skorpion, GTI was the perfect choice.
Once the company raises the money required to complete the feasibility study, most of the risk for MMGG will be gone. The remaining part of the feasibility study is mostly defining the costs and profitability. Once that's complete, virtually all the risk will be gone, and MMGG will likely have several takeover bids to fall back on as the worst-case scenario, with the most lucrative path to move to production with debt and equity financing (at a much higher stock price). Skorpion was bought out by Anglo American (AAUK) at the completion of their feasibility study, resulting in a huge profit for Reunion Mining shareholders, who received approximately $90 million for the 60% of the mine they owned (Anglo had owned 40%), even though the price of zinc was near a bottom, much lower than current prices. Anglo American is one likely bidder for MMGG at the completion of the feasibility study.

Valuation Based on Zinc Alone
With nearly 5 billion tons of zinc, a $0.60 margin would mean nearly $3 billion of gross profits for Metalline Mining. Even if the initial costs are in the $400 million range for the mine and extraction plant and you discount heavily for the approx. 3-year wait to get into production and the profits coming over 10-12 years, MMGG is still extremely undervalued at its current market cap under $30 million. Earnings per year once in production should be several times the current market cap. Metalline's zinc reserve alone is worth over 100 times its current market cap.
Over 5 years ago, the Reunion Mining takeover valued the Skorpion mine at approximately $150 million at the completion of the feasibility study. MMGG's zinc reserve is similar in size to Skorpion's, their costs to go into production are likely to be lower than Skorpion's, and zinc prices are much higher than 5 years ago.

Company insiders, recognizing the long-term value, have bought MMGG shares between $1 and $1.66 over the last few years, and none of the current management has sold.

Any way you look at it, MMGG is severely undervalued based on the zinc opportunity.

Private Placements Depress Share Price
Metalline Mining initiated a private placement at $1/share over 2 years ago to raise capital for the reserve definition and feasibility study. Many of those private placement investors sold their shares as the lockup expired beginning in late 2004, pressuring the stock price over the last 15 months. Despite the fundamentals improving dramatically since then, with the price of zinc nearly doubling along with the successful completion of the metallurgy portion of the feasibility study, the stock price has lost most of its value from over $3 in October 2004 because of this selling.

Early in 2005, Metalline Mining attempted to finance the rest of the feasibility study with a private placement at $1.50 per share. However, the aforementioned profit-taking investors and big investors who wanted to get private placement shares cheaper sold, pressuring the stock down to $1.50 after starting the year at $2. Metalline was forced to lower the private placement price to $1.125, after which the stock again sold down to the private placement price. Big investors insisted on a still lower price for the private placement, so the placement price was lowered to .80, with a $1.25 warrant. Yet again, the stock sold down to the new private placement price, as investors sold their old shares to get the new shares and the warrant. Now that the private placement is coming to a close, this selling pressure along with tax-loss selling has decreased. This private placement should get them through the rest of the feasibility study.

Rally Last Week on Big Volume – Buy Signals
With zinc hitting a 16-year high, other zinc exploration stocks like Canadian Zinc and Yukon Zinc have run up over 75% in recent weeks on big volume. MMGG had been lagging because of the aforementioned reasons, but finally began to join the zinc stock rally last week. MMGG rallied 22.5% last week from a 6-year low on the highest volume since it hit $3.28 on October 1, 2004, even though it was a holiday-shortened weak and some investors must have been tax-loss selling into the rally.

Last week's rally triggered some technical buy signals on the MMGG weekly chart:



With the volume increase and accompanying price increase, an On Balance Volume (OBV) buy signal was triggered last week. You can find out more about OBV here: http://stockcharts.com/education/IndicatorAnalysis/indic-obv.htm.

After months of bullish divergence between MACD and the stock price, with the MACD increasing from its summer low while the price continued lower, MMGG also finally broke out of its 15-month downtrend channel last week. This break from the channel triggered a Parabolic SAR buy signal. You can find out more about Parabolic SAR here: http://stockcharts.com/education/IndicatorAnalysis/indic_ParaSAR.htm.

These technical analysis buy signals indicate that MMGG has seen its bottom and is likely to continue higher in coming weeks and months.

Metalline Mining Silver/Copper
In addition to the zinc reserve currently in the feasibility stage, Metalline Mining also has high-grade silver and copper mineralization on the North side of its Sierra Mojada property. Metalline's Sierra Mojada property has very unusual geology (http://www.metalin.com/geology.html), with 2 distinct mineral systems: high zinc mineralization on the South side of the Sierra Mojada fault and high silver and copper mineralization on the North side. Over 5000 samples had been collected from the North side through 1999, indicating very high grade silver and copper mineralization. In 1999, with the positive feasibility study from Skorpion, Metalline shifted its focus to the enormous potential of its zinc mineralization, putting the silver/copper exploration on hold.

With GTI hired to do the feasibility study, Metalline staff has been able to again give the silver/copper mineralization some attention. Over 2000 new samples have been collected, the results of which should be available shortly. If the results continue to be good, the silver/copper side of MMGG could have as much or more potential than the zinc side. Up to this point, Metalline had not actively promoted the silver/copper side of their property.

Future Plans
Metalline management recognizes that there are two areas that need improvement. First, as a bulletin board stock, they've had difficulties attracting big investors, many of whom won't invest in bulletin board stocks. Look for them to pursue a Toronto or Amex listing, which would give them more credibility and open up doors to a high number of large investors. Secondly, look for them to significantly increase the marketing and PR efforts, possibly hiring a PR firm or two to help them in that area. The lack of news and promotion combined with the private placement sellers hurt the stock last year.

Conclusion
Given the extremely low valuation versus the enormous zinc opportunity, MMGG, trading at less than 1% of the proven value of their zinc reserve, should be several times higher after they complete the feasibility study. If the results from their recent silver/copper sampling continue to be positive, that will also help the stock move significantly higher. At the current level under $1, MMGG looks like a steal, and anything under $2 also looks like a great value with huge upside for the long term.

[VikingFan]

http://greattrades.blogspot.com/2006/01/mmgg-valuation-analysis.html
As the price of zinc continues to climb (.9366/pound vs. .8599/pound at the beginning of the year when we wrote our first report), MMGG's zinc mining property becomes more valuable. We've done some further analysis on the valuation of Metalline Mining's zinc mining property. While many variables remain to be firmed up during the rest of the feasibility study, we've used ballpark estimates in the calculations below.

Let's look at 3 different ways to value MMGG's zinc mining property:

1. Skorpion mine value -- The Skorpion mine buyout in 1999 valued Skorpion at about $150 million. MMGG's zinc deposit is very similar in size to Skorpion's, and likely has a lower capital cost. With the price of zinc now about double the 1999 price, and with gross profitability for a 25 cent zinc producer being about triple that of 1999, one could guess at a buyout price of 2-3 times the Skorpion buyout price. If the zinc shortage continues to worsen and the zinc price continues higher, MMGG's zinc becomes more valuable. Given approximately 37 million fully diluted shares outstanding after the current financing, such a buyout would be equivalent to about $8-12/share.

2. Multiple of annual earnings -- While it won't be known until the feasibility study is complete, the cost of going into production (building the mine and extraction plant) has been estimated at between $250 and $400 million (Skorpion was over $450 million). Assuming $400 milliion is needed, and is financed with 60% bank debt financing (standard with a bankable feasibility study) and 40% equity financing, 40-50 million shares of dilution would be required at a stock price of $3.20-$4/share (a 50% joint venture for someone to provide only 40% of the cost to go to production would be even better for shareholders). Assuming an 11-year life of the plant, 180 million metric tons/year processed, a 25 cents/pound cost to produce zinc, and the current .9366 price of zinc, annual revenues would be over $370 million, gross profit over $270 million, and annual earnings (before taxes) of well over $200 million. A 4x multiple would result in a stock price over $10 while a 5x multiple would result in a stock price over $15. Discounting the 4x multiple back 15%/year for 3 years to production would result in approximately a $7 stock price, while discounting the 5x multiple back 10%/year for 3 years would result in approximately an $11 stock. This method results in approximately a $7-11/share estimated value.

3. Present value of earnings stream -- MMGG's management is negotiating with Mexico (for the mine) and other countries (for the extraction plant) for tax breaks. The present value of an earnings stream of 80% (to net out taxes) of the earnings calculated in #2 above over 11 years using a 15% discount rate is nearly $1 billion, or about $12.50/share. Using a 10% discount rate results in nearly $16/share. Discounting further by 15%/year and 10%/year, respectively, over 3 years to get to production results in approximately a $8-12/share estimated value.

All 3 of the above methods result in a share price after the feasibility study of about $7-12. The over 1.5 billion pounds of zinc in the Smithsonite manto should add significantly to MMGG's value, probably extending the life of the plant by several years. If the silver/copper side of MMGG turns out to be more valuable than the zinc side, MMGG could be worth more than $25/share, especially if the prices of zinc, silver, and copper continue higher.

Lots of assumptions are built into the above calculations, so take them with a grain of salt. However, many of the uncertainties will be removed during the completion of the feasibility study over the next year or so, and the numbers will become clearer to all. Some may be better than assumed and some may be worse. However they turn out, it looks like MMGG at the current price level is extremely undervalued and poised to move much higher.

[VikingFan]

Here's why you will make a fortune on zinc.



Silver Stock Report
by Jason Hommel
January 28th, 2006



I'm so excited! I've had a revelation! An epiphany! A Eureka moment! I looked at the zinc leverage of MMGG, especially in light of expectations of higher zinc prices, and I tried to quantify that, and oh what a revelation!



Metalline Mining (MMGG.OB)

http://www.metalin.com/site_map.html

19.8 million shares fully diluted

(plus a $4-8 million financing just completed, not sure how many more shares.)

(I'll estimate 15 million more shares fully diluted)

I'm guessing: 35 million shares fully diluted.

@ $1.77/share

I'm guessing: $62 million Market Cap

4.9 billion pounds of zinc resource

To produce annually: 398 million pounds of zinc.

(MMGG needs to raise about $300 million to build the mine.)



$62 million Market Cap / 4900 million pounds of zinc = $.0126/pound

You get 82 pounds of zinc in the ground for 1 pound of zinc's worth of shares.



That's way more leverage than we get in most silver stocks! The best silver stocks provide about a 30 to one leverage. Why is the zinc in the ground so much cheaper? Because there are gold bulls, and there are silver bulls, but I don't think there are very many zinc bulls! Who runs a "zinc stock report"? I realized that these other metals were badly neglected by investors and analysts and newsletter writers when I did a full analysis of my moly stock, IGMI.



Sure, the mining gurus are generally bullish on commodities, as am I, but I've not seen anyone do the following type of analysis, as I'm going to share with you.



Now, the SEC forbids mining companies from making projections on assuming higher commodity prices. It's insane that they prevent the mining companies from showing you basic seventh grade math, but you and I can do it legally, just fine.



Yesterday, I quoted several executives of major mining companies, one from the number two zinc producer in the world, who predicted that zinc prices will rise for the next 2-3 years, since no new major zinc mines can come online and become operational in that time frame, and many existing mines are closing. Sounds logical and realistic, and I agree. But what does that mean? Unless we quantify it, and "count the cost", that's just fuzzy thinking. So, what price may zinc rise to? Will zinc rise from $1.04/pound today to $1.50/pound next year? Or are we talking much higher here?



Here's my thinking: I believe it's possible for zinc prices to increase well beyond $2/pound--even up to $3.50/pound. Here's why & what that will mean:



Zinc is a minor ingredient in galvanized steel (3% by weight on average), used to prevent rust, and is absolutely necessary in many, or most applications. Absolutely necessary. And a minor cost. Let those two concepts sink in: necessary & cheap.



It's like silver, or uranium. Silver is used in tiny quantities in industrial applications in electronics because silver is the greatest conductor of electricity, and thus, absolutely necessary! Furthermore, a significant rise in silver's price will not reduce demand, because the end product is so very much more expensive than the silver used. And uranium is absolutely necessary to fuel a multi billion dollar nuclear reactor, and those people who run it will buy all the needed uranium, regardless of cost.



Here's an analogy. Steel is somewhat like a cookie recipe. It may cost $10 to make a batch of cookies. But one vital ingredient may cost $.20, such as the salt, or baking soda, which is like the zinc. Who cares if the price of that tiny, but vital, ingredient rises 10 fold, to $2--you are still going to use it to make the batch of cookies. But cookies are not as necessary as steel!



Likewise, regardless of the price of zinc, it will be used to make stainless steel that does not rust that is needed for things like cars, kitchen knives, and who knows what else.



Think about this: the world could sustain oil prices going from $10/barrel to $70/barrel. Hey, the inflation adjusted high of $43/barrel from 1980 is a whopping $240/barrel! And oil is the largest commodity there is in terms of its cost. For every $100 spent on commodities, probably $35 is spent on oil. Surely, the wheels of the world economy will not fall apart if tiny little zinc rises ten fold from the low of $.35 to $3.50/pound.



And if oil can rise nearly 20 fold, zinc can rise 40 fold, but let's not go there.



Here's another key point: Several other minerals needed in steel have risen about ten fold already, such as molybdenum and cobalt. I know of only two other commodities that have risen as much, selenium and iridium. So, 2 out of those 4 are used in steel. Pause, and let that sink in.



Zinc is clearly headed up next, due to China's increasing demand for steel—and this all helps to explain the parabolic price curve in zinc that we are now witnessing.



And I'm sure there may be short covering of futures contracts, too, just like there will be in silver!



So, what does that mean for little zinc explorer/developers like MMGG, that are highly leveraged to rises in the zinc price? Oh boy, this is what had my head spinning. Are you ready for this?



MMGG can produce 398 million pounds of zinc per year, at $.25/pound, which is the lowest cost in the industry due to the new zinc/oxide electrowinnowing process.



Imagine a profit of, say, a conservative $2/pound, times nearly 400 million pounds produced each year. That's $800 million profit per year. MMGG could have a market cap of nearly $8 billion (or more), up from under $80 million today. MMGG is a stock that could rise nearly 100 times in price!



The world is geared to overlook such opportunities, partly because of laws that prevent companies from showing you such math, but also because so few people truly understand the ramifications of hyperinflation taking place right at the beginning of a major commodity boom. Hyperinflations always cause major price distortions at the edges of an economy in those "essential and overlooked things".



Furthermore, zinc is not glamorous like gold or silver. But great fortunes were made in commodities during our industrial age, in steel and oil. And this industrial age is bigger than any before ever in history!



But just like little silver is geared to outperform gold, little zinc is geared to outperform iron.



The best part is that God saw fit to put silver and zinc together in many deposits on earth.



Since silver prices are too low, that means that less zinc is produced as a byproduct of silver mining, and this is helping to create the opportunity that exists today.



So, what are the drawbacks and dangers that may prevent us from reaping 100 fold gains? I think the biggest danger is hedging. If a company, such as MMGG, decides to hedge, or pre-sell, the zinc production, at, say $1.50/pound, to borrow money to finance a mine, but hyperinflation takes zinc prices up to $3/pound or well beyond as dollars become worthless, then bankruptcy is a real risk. If you own stock in MMGG, I strongly urge you to contact Merlin, the president, and urge him to avoid hedging at all costs! It will be easier to convince a man now, than later down the road.



Any hedging during hyperinflation is like giving away your birthright for a bowl of soup.



Industrias Penoles recently hedged zinc at $1000/ton, and zinc is now over $2,000/tonne! Oops, they just destroyed shareholder value!



Another thing that might prevent MMGG from rising 100 fold, ironically, is higher silver prices! What? Yes, because as silver prices rise, more silver mines will go into production, and since zinc is a natural byproduct of many silver deposits, more zinc will be produced. But this is a wonderful problem for the zinc/silver companies like MMGG to have! As one man once said to me, "You mean this danger can actually make me more money? Great!"



I do not know which will continue to go up in price further and faster, silver or zinc. Currently, zinc is outpacing silver, and both still need to catch up to oil's gains. When I heard the zinc story in the past, I always ignored it. I thought, sure, zinc is necessary, but so is silver, but silver will have monetary demand, and nobody will buy zinc to use it as money. But that does not matter, because I'm not advocating the purchase of physical zinc! The beauty of zinc is that zinc is overlooked by the equity investors, and that means that with zinc exploration companies, the leverage is that much greater, even for modest price rises in zinc. I'll never stockpile zinc, but I will make a pile of money from my silver/zinc stocks—and if things go as I expect, I'll use the profits to add to my stockpile of silver!



Currently, I think Metalline is the best zinc/silver company that I know of at current share prices. To find other silver/zinc companies, search for "zinc" in my last silver stock report, #57, from July 2005, at the archives at my web site.



Final Disclaimer: I currently own Metalline, and nobody has paid me to write this.



Sincerely,



Jason Hommel
silverstockreport.com
bibleprophesy.org

[Buyhigh?]

This baby really holds its ground, even when metals are down today!

[VikingFan]

Yes, probably because it's still very undervalued.  Here's a comparison to other zinc stocks, showing it has a long way to go to catch up with the rest:
http://greattrades.blogspot.com/2006/02/mmgg-and-other-zinc-stocks.html

[Buyhigh?]

Back into today at 2.29

[Terliso]

Might be a good entry point..
Touched 50(SMA) all signals turn bullish

[VikingFan]

Might be a good entry point..
Touched 50(SMA) all signals turn bullish

Yes, and also looks like a cup & handle breakout on the weekly chart.  Here's an update to the valuation analysis from January, this time pointing to a fair value of the zinc side alone of $13-21:  http://www.greattrades.blogspot.com/

Great entry point for the breakout and for the long term, IMO.

[VikingFan]

After last week's breakout, MMGG's new P&F target is 9.88, according to stockcharts.com, up from 0.00 last week.  Lots of upside still...

[VikingFan]

After hitting 5.67 on the breakout after announcing great silver drilling results, MMGG has retraced to under 4.50 along with other metals stocks, relieving the very overbought conditions it had on the daily chart. 

IMO, this pullback provides another good entry point for the long term on this still severely undervalued zinc/silver mining stock.  Consolidating just above the all-time high of 4.37 after breaking through it this week.

[VikingFan]

http://greatinvestments.blogspot.com/2006/07/3rd-technical-analysis-buy-alert-on.html

"As many of our readers know, Metalline Mining (MMGG) has been and continues to be our favorite stock and best idea for long-term upside potential. We have shown MMGG's chart and highlighted particularly good buying opportunities based on technical analysis buy signals 2 different times so far this year, first at the beginning of the year in our original, most detailed report and then in early May on the breakout from consolidation. Both times MMGG proceeded to rally sharply (tripling in 2 months at the beginning of the year, and then doubling in 6 days in May, moving above the stated $5 target from the cup and handle buy signal), as you can see in the below chart:




In this update, we are highlighting our 3rd particularly good buying opportunity on Metalline Mining based on technical analysis."

[Stocky2000]

great to find this thread...yesterday i was also thinking of buying and did it now:)

[VikingFan]

great to find this thread...yesterday i was also thinking of buying and did it now:)

Welcome to the thread.  I think we're going to do extremely well with Metalline.  After zinc has more than tripled and silver has more than doubled, it's arguably far more undervalued than when it was under $1 last year, and lots of great things are happening over the coming months.

[VikingFan]

How High Can MMG Go?
http://www.greatinvestments.blogspot.com/

Mmm, Mmm, Good
http://greatinvestments.blogspot.com/2006/11/mmm-mmm-good.html

The chart looks poised for a breakout to new highs.  Next week will bring a new exchange, new symbol, and new chart.  Money flow reversing to positive, especially now that they're leaving bulletin board hell and institutions will be able to buy on Amex.

[setravis]

Changed Ticker Symbol
--------------------------------------------------------------------------------

'MMGG.OB' is no longer valid. It has changed to MMG. 

This one now trades on the AMEX:
Therefore this Thread will be moved to the Stock Picking Board...