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CDE.. This was in my inbox this a.m.

Finding a Heart of Silver

The Rude Awakening
Baltimore, Maryland
Tuesday, January 8, 2008

Digging up the "real deals" in junior mining companies,
One suitor set to take silver all the way,
Cashing in on the precious metal bull and much more...

"Everyone is talking about gold," we hear you say, "but what about silver?"

It's true that the investment world (at least the smart money portion of it)
is catching on to the underlying factors driving the current bull market in
everyone's favorite shiny yellow metal. But, ever the perennial bridesmaid,
silver rarely makes the headlines. Instead, she exists in the shadows of her
flashier, brasher relative, quietly awaiting her turn at the altar.

Since its one year low of $11.40 back in August, silver has staked a
significant claim on "bouquet rights," lunging over 35% to rest around the
$15.60 mark as of yesterday's trading.

As the true beauty of silver comes to light, one suitor, above all others,
looks set to take the prize. If Greg Guenthener is right about this "junior,"
savvy investors could be in for some very attractive profits. Read on for
Greg's full column below...

Searching for a Heart of Silver
By Greg Guenthener

What do you do when the dollars in your pocket are withering in value? Well,
you can try to cushion the blow by investing in foreign stocks and bonds…or
you can try to profit from the situation. We like the second option, which is
why we like investing in selected gold and silver companies…especially the
small-cap "junior" companies.

Unfortunately, lots of junior mining companies consist of nothing more than a
few tracts of unexplored land and lots of glowing press releases. These
companies bear a close resemblance to Mark Twain's famous description of a
gold mine: "A hole in the ground with a liar standing next to it."

But the "real deals" in the mining sector can deliver really big gains. For
example, one of North America's oldest silver miners is about to become the
world's largest. The name of the company is Coeur d'Alene Mines (NYSE:
CDE )…and we think its stock is very, very cheap. By 2009, Coeur will join the
ranks of Silver Wheaton Corp. and Pan American Silver Corp. as one of the top
silver miners on the planet. Thanks to a merger Coeur completed three weeks
ago, this junior mining company expects to produce 29 million ounces of
silver in 2009. That's more than anyone else in the world.

On top of just plain out-producing everyone else, Coeur will also have the
lowest cash production cost per ounce of silver in the industry at $1.73 per
ounce. So, it's not hard to see that the largest silver producer with the
lowest production costs in the world will not remain a "junior" for too much
longer.

Despite Coeur's exciting growth profile, its share price languishes. Perhaps
investors are focusing on Coeur's difficult past, rather than its promising
future. For the past few years, Coeur d'Alene has only produced a moderate
amount of silver and a small amount of gold out of its five mines. The
company produces about 12.8 million ounces of silver every year, which puts
it right in the middle of the pack. But production dropped sharply during the
second half of 2007.

Coeur's Cerro Bayo mine encountered serious setbacks, which caused the mine
to report an astronomical cash cost of $6.05 for every ounce of silver
produced there during the quarter. The company blamed higher costs of
contracts, outside services, supplies, and supervision, as well as a slow
transition in higher grades.

Meanwhile, Coeur's Rochester mine just shut down for good. Rochester was the
company's largest mine – accounting for about 40% of Coeur's entire
production in 2006. Losing 40% of total production is quite a hit to take for
any small mining company.

However, big changes are around the corner…

Next month, Coeur's San Bartholomew Silver Project should begin producing
around 9 million ounces of silver annually. That's a 75% increase in
production over the company's current operations. (However, the project is in
Bolivia, which just passed legislation calling for a 50% tax rate on the
mine. The company claims that despite the high tax, the higher price of
silver is still worth opening the mine).

On top of this, later this year, the Kensington Gold Project near Juneau,
Alaska should start producing upwards of 150,000 ounces of gold annually,
which would ramp up the company's gold production by 500%. This project is
already 100% complete, but cannot begin production until the local and state
governments finalize permitting. Nothing is certain when bureaucrats begin
deliberating, but Coeur expects no significant delays.

The final pieces of the "new" Coeur d'Alene are the Guadalupe and Palmarejo
Mines that are set to go into production in the first quarter of 2009.

Together, these two mines should produce more than 10 million ounces of
silver per year and 115,000 ounces of gold. This project will be the largest
and highest quality silver-gold project in the world. Coeur acquired these
large-scale projects through a merger it completed just three weeks ago.

Taking account of all these new projects, Coeur d'Alene's annual silver
production will triple to nearly 30 million ounces per year, while its gold
production will quintuple to 200,000 ounces.

Coeur's 29 million+ ounces of production would be the highest of any major
silver miner like Silver Wheaton (22.1 million ounces per year), Pan American
Silver Corp (24.7 million ounces per year) or Hecla (6.2 million ounces per
year). Also, Coeur's reserves and resources will rise sharply. Thanks to the
merger, Coeur has 30% more in-ground assets than the next closest silver
miner.

Then there's Coeur's gold production, which helps to offset the cost of
silver mining. By counting the Kensington and Palmarejo gold production as a
"by-product credit" against the cost of silver mining, Coeur's average cash
cost to lift silver out of the ground and separate it from the other ores,
will be $1.73 per ounce across all of the company's mines. (Coeur's cash
costs at the new Palmarejo Project will be only 41 cents per ounce!) That
beats Silver Wheaton ($3.98 per ounce), Hecla ($5.02 per ounce), and Pan
American Silver ($2.98 per ounce). In fact, it will be the absolute best in
the industry.

Starting in 2009, Coeur will be the No. 1 primary silver producer in the
world. And it'll be doing it cheaper than anyone else. So when you look at
the current top three silver producers (Silver Wheaton has a market cap of
$3.6 billion, Pan American Silver's is $2.72 billion, and Silver Standard's
is $2.71 billion), Coeur's $1.15 billion market cap seems unfairly
discounted. Even if the stock doubled from here, Coeur's valuation would
trail behind the other three silver majors.

As for the company's current setbacks, Coeur has made it a point of utmost
urgency to dig in and figure out what happened in Cerro Bayo and find a way
to fix it. The company recently hired a new general manager to take over
operations and is preparing a detailed technical review of the situation.
This topic dominated the company's third quarter shareholder's conference
call, and was a major reason for the decline of the company's share price
since summer.

Good news has already come out of Cerro Bay. A total of 5 new veins have been
discovered, doubling the mine's reserves. Thanks to this new discovery, along
with the recent breakout in silver prices, the tide may be turning for Coeur…

It's almost impossible to ignore that by 2009, the company will be graduating
out of junior status by out-producing all the rest. Coeur shares could very
well be volatile for the next few months. But at the current quote of $4.26 a
share, the stock seems very, very cheap…especially if the dollars in your
pocket continue to wither.


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