macmin - huge potential

I am a silver bull and a firm believer that we will see $30/40 silver prices not too many years into the future. There are even pundits that believe silver will soar to $100/200 prices in the years to come. After all, the average Joe blow is not aware of the fact that silver stock piles are exhausted and that China has advised comex that they have futures contracts for 75% of next years production for delivery in July 2005. I have been advising friends and relatives to get into silver. One friend has asked me about the potential of MMN so I sat down and did some ball park figures. I know from conversations with Macmin that they will be producing 3M oz per year but may also increase this prior to going to production. So I chose 5M oz because its a nice round figure. Now if you firmly believe that the silver/gold ratio will return to 16, that would give you a silver price of US$26 (AUD$34) at todays gold price. MMN's expected costs are from memory $5.50 per oz and to round things off for exploration etc I will allow a further $4. This leaves a potential profit of $25 x 5M oz which equals $125M. Give it a PE of 10 and you come up with a market cap of $1.25 billion. Divide this figure by the 400M shares/options on issue and you come up with a $3 share price. Now I will be the first to admit that these figures are only for the silver true believers which I am one of. Now what I have told my friend is that if he was to buy 100,000 MMNOA's @ 11c for a cost of $11K he could POTENTIALLY make $300K. The risk is that silver drops and MMN never go into production, whereby the options will drop to 4 cents or so. So the risk/reward for MMN is a loss of $7K or worst case $11K against a potential gain in the hundreds of thousands of dollars. Now to the non believers out there, please remember that silver is only 34 cents off 20 year highs. I am a believer that when the business sections of the different medias start to promote that silver has reach a 20 year high that it will cause a lot of people to seek out silver investments. Physical silver is almost non existant which leaves shares only. Now pure silver plays are rare and MMN has the monopoly in Aust. Keep in mind that the entire silver market only has a market capitalisation of around $20 billion and world share markets have funds invested of around $30 trillion, it wouldn't take much to send the likes of MMN etc well over a PE of 10.

High risk / high reward, well no I don't think so! What do others think?

Cheers,

Phillw