Silver Penny Plays

[oryx]

Rocket,

I agree with your comments regarding SHSH. But I disagree with your comments regarding SFMI. SFMI only has about 6x the number of outstanding shares. Though the same amount of money coming in would make a larger difference in SHSH's share price, both companies are presently so undervalued that any serious amount of money coming in would rocket the sp. SFMI already demonstrated this earlier this year.

While SFMI management made some early missteps, their recent performance has been exemplary. They bought the land, got permits, constructed a mill and got to production in what may be record time. As far as info, I agree their IR needs to be clearer and more transparent, but IR is separate from their performance on the ground. The "red flag" you speak of is message board chat and has nothing to do with management.

I and over a hundred other shareholders recently attended the annual meeting. My summary of it is here: Report from SFMI shareholder meeting Everybody there, including a number of people from the mining industry (some local) was uniformly impressed. While some less than clear PRs had led us to believe the mill was operating at a higher rate than actual, it became clear that they had had to cut back production only temporarily until they dealt with a water supply sediment problem. I believe that problem either has been or will soon be fixed, allowing them to ramp up to expected levels. They have been "tweaking" the mill using "lower" (not low) grade ore (not tailings) from one of the many mining sites from the 1800s that reportedly is ~0.75 oz/t Au eq. They will soon be switching to higher grade ore from another site that is reportedly 3-4 oz/t. Even with the lower grade ore and temporarily scaled back production, they are producing enough to fund what they want to do. Once they have finalized a smelter contract, they will be sending the stockpiled concentrate to the smelter, and will then be able to release final grades and tonnages for what they have processed. It was made clear at the shareholder meeting that they would not be releasing partial numbers. It makes it hard to wait, and the sp may suffer in the meantime, but it also makes clear that SFMI will not release results just to pump. As an investor in SFMI, not a trader, the short term price movements don't make much difference to me. I know it will be much higher a year from now. There is something like 800,000 tons of already mined ore at the various sites, more than enough to fund everything SFMI wants to do and keep the mill busy until they reopen and start mining the mines. Historically, the mines of War Eagle Mountain averaged 2.5 oz/t Au eq, and the mines were by no means played out when mining stopped in the 1800s during a financial crisis. I think SFMI may be able to find even better grades using modern techniques. Kinross had rights to the mountain but had to give it up due to a cash crunch back when gold dropped to the $200s, but they are still mining the two adjacent mountains.

SFMI has had no need to conduct extensive drilling because they know what they have based on historical reports and data, and more recent (but mostly pre-43-101) sampling, drilling, and assays. The numbers are what most companies can only dream of- Here are just a few of the results (all from SFMI PRs, often quoting independent analyses, many conducted before SFMI acquired the properties): “2.45 oz. /ton gold“, “0.75 oz per ton”, “3.6 oz per ton”, “16.846 Au OPT”, “1,000 ppm in Gold (23.86 oz Gold / Ton)”, “5.1 grams/ton Au and 72.7grams/ton Ag”, “3.3 g/ton Gold and 94.5 g/ton Silver”, “6.9 g/ton Gold and 50.9 g/ton Silver”, “.62 opt Gold and 8.48 opt Silver”, “3.3 g/ton Gold and 94.5 g/ton”, “1,000 ppm of Gold, or 660 g/t Gold (23.27 oz Gold/ton)”, “64 g/t Gold (2.5 oz Gold/ton)”, “.18 to .85 oz Gold/ton”, “.11 to ..45 oz Gold/ton”, “.24 to .88 oz Gold/ton”, “63 g/t Gold (2.2 oz Gold/ton) 1,109 g/t Silver (39.1 oz Silver/ton)”, “477 g/t Gold (16.9 oz Gold/ton) 3,180 g/t Silver(112.2 oz Silver/ton)”, “103 g/t Gold (3.6 oz Gold/ton)”.

SFMI has no 43-101 compliant "resource" at the moment because they didn't need to develop one. They had plenty of information on the available ore, and all they needed to do to get to production was to build a mill. That meant no major financings, so no 43-101 required. They are now essentially debt free, something few companies manage in the process of getting to production. And as far as a 43-101, SFMI will be producing one. They don't need it for financing, so maybe for a buyout?

As far as market cap, estimates of the amount of gold and silver in the mountain are in the 5-8 million ounce range. For an operation in the US, with its own mill, close to cities and infrastructure, etc., that is really a goldmine- both literally and metaphorically. If SFMI manages to "prove up" anything like 5-8M oz, that would mean a market cap of $1 billion valuing the in ground gold at only $125-200/oz- not a stretch by any means. And with the majors cash rich and desperate for replacement ounces, SFMI may not even need a 43-101. Remember, Barrick bought Arequipa for $1 billion based on just 34 drill holes with typical grades of 2-7 gpt. No revenue, no production, no "official" or "proven" resource estimate and not even any historical record of production. "The company has not released a resource estimate, but mining analysts have estimated a potential of 3-8 million oz. gold. Barrick has stated that it is basing its bid on a resource of 5 million oz." (from The Northern Miner)

So post the positives of SHSH all you want- you won't get any argument from me. But don't shortchange or underestimate SFMI.