Here is an excellent report on Silver Eagle Mines by Adam Hamilton of Zeal LLC, who does great work on many silver companies.


Silver Eagle Mines


     Silver Eagle Mines is one of the many junior silver explorers active in silver-rich Mexico.  And like Peru, Mexico is an ideal place to mine this shiny-white metal.  Not only is Mexico geopolitically safe with favorable mining laws, but this country has a strong history of silver production.  In fact, it is believed that up to one-third of all the silver mined in the history of the world has come from Mexico.


     Ever since the Europeans began exploiting the precious metals in the “New World” in the 16th century, the Mexican silver-mining industry has been quite robust.  While in recent years Mexico has slipped down the chart of mined silver production, it is still right behind Peru.  Today Mexico produces about 15% of the world’s mined silver supply and combined with Peru these two Latin American powerhouses have a strong hold on the global silver market.  Together they are responsible for a third of the world’s mined supply.


     Considering its history, I believe Mexico will soon overtake Peru as the largest global silver producer.  And ultimately it should be able to accomplish this without making a single new grassroots silver discovery.  This may sound a bit strange, but the key to this idea lies within the thousands of past-producing mines that litter the massive precious metals belt that drives through the center of this country.


     The miners of the past already did the work for the new generation of silver miners.  They made the discoveries.  And the new miners can take advantage of these discoveries because most of these old mines still have a lot of silver remaining.  While this concept seems a little backwards, today’s silver miners have the advantage of time.  Most of Mexico’s historic mining efforts focused on the low-hanging fruit via super-high-grade surface deposits or underground along the best-of-the-best bonanza-style veins.  Silver was so abundant early on that the miners didn’t waste their time unless the silver was jumping out of the ground at them.


     Because of this, today’s silver explorers are finding vast resources of silver mineralization at these past-producing mines that previous operators either didn’t identify or considered too low grade.  So with a combination of modern exploration and processing techniques and higher silver prices, many of these historic deposits are today amenable to profitable mining.  Even better is many of these deposits are open in all directions.  This allows for brownfields discoveries of the same high-grade silver that was so abundant for the Spaniards centuries ago that they used it to shoe their horses.  Silver was flowing in the streets!


     With so many silver explorers flooding into Mexico to try their hands in the silver-mining industry, as you can imagine there are a lot to choose from.  And this Mexican silver rush will become apparent even within this report.  On the junior side of the spectrum it is essential to choose those companies that have experienced management and mine-building expertise.  And this is exactly what Silver Eagle Mines has.


     Silver Eagle is a newer stock to hit the public markets but its founding as a private company dates back to 2003 under the name of A.J. Resources.  While Silver Eagle’s early interests were in Canadian exploration properties, the late 2003 acquisition of a private Mexican company brought it to where it is today.  This acquisition gave Silver Eagle Mines an 80% interest in its flagship Miguel Auza property.


     Miguel Auza is a small-scale but impressive silver project that is quickly advancing to once again become a functional mining operation.  This project is spearheaded by an exceptional management team with a broad array of valuable experience in the mining industry.  And the experience this management team brings is being translated into vertical mine integration that should greatly reward shareholders.


Development Projects

Miguel Auza


Zacatecas, Mexico

Est. Annual Prod.


Est. Cash Costs


Silver Reserves


Initial Production



     Miguel Auza is a municipality in the state of Zacatecas.  It is also the name of the property that has been host to mining for over 400 years.  Interestingly remnants of infrastructure can still be found on this property from the days when true horse power spun the winders to hoist ore from the rich silver veins.  The area in which Silver Eagle is focusing saw mining operations as recent as the late 1980s.  And SEG believes there is a lot of silver left to be mined.


     As mentioned Silver Eagle acquired its original interest in Miguel Auza in 2003.  This initial 80% interest was obtained for just $250k in cash and $2m of exploration commitments which have subsequently been fulfilled.  Then in late 2006 SEG purchased the remaining 20% of this project for $4m.  Also in the last several years SEG has continued to consolidate the ownership of the massive Miguel Auza property to where it now has direct ownership in 18 of the 20 mining concessions.  This total land package now includes the mineral rights on over 41k hectares (100k+ acres).


     Since it has established ownership, Silver Eagle has been aggressive in advancing the development of Miguel Auza.  It has already obtained all the necessary permitting for exploration and operation, the infrastructure is in place, and a local experienced workforce is already on the job.  In its exploration efforts to date 50k meters of drilling have been completed with another 30k planned for 2008.  SEG is now able to see the fruits of its labors with a growing resource base that includes 17m+ ozs of high-grade silver.


     Typically the silver mineralization in underground vein mining grades higher than what you would see at an open-pit deposit due to geological makeup and mine design.  And Miguel Auza’s resources are grading very nicely so far.  About two-thirds currently reside in the indicated category grading an average of 159 g/t with the rest in the inferred category grading an average of 215 g/t.  And I suspect that through ongoing exploration Silver Eagle will not only be able to grow its silver resources but improve the grade.


     Overall exploration and development efforts at Miguel Auza continue to be encouraging.  At the known vein systems from previous mine workings Silver Eagle continues to drill and develop intercept ramps.  And this development continues to identify new veins.  In fact drilling at several veins has been returning silver grading in excess of 1k g/t!  So far all veins remain open at strike and at depth.


     Now even though Silver Eagle Mines has not proven economic reserves yet, I consider Miguel Auza to be a development project.  And this is because within Miguel Auza’s Calvario vein system a small-scale mining operation is already underway.  Calvario is SEG’s primary vein system of focus and currently hosts all the identified resources.  Test mining is focused on the bulk samples retrieved at depth or stockpiled at the surface and the ore is currently being processed at a rate of 150 tonnes-per-day (tpd).


     Even though this operation does produce cash flows with the sale of its concentrate, it is not classified as an official mining operation.  Silver Eagle classifies this output as incidental revenue that credits development costs.  Overall the information obtained from this operation has proven to be very helpful in the design of the future mining plan.


     As part of a $3m 2008 exploration program Silver Eagle Mines has four drills spinning on the Miguel Auza project.  I expect the results from this program will continue to upgrade and expand resources.  These results will also feed a PFS that is underway targeting expansion plans.  Interestingly Silver Eagle just recently purchased equipment capable of increasing mill capacity to 800 tpd.  The PFS is expected to be complete any day now and the results should dictate how best to utilize this new equipment.


     Ultimately don’t let resources and operations on the small side today distract you from Miguel Auza’s potential going forward.  With all the known vein systems open in all directions, several other high-potential exploration targets, and a huge land holding in the middle of a rich mineral belt that is largely unexplored, I believe the sky is the limit for this project.  Miguel Auza is an excellent operation.




     Silver Eagle has a very strong balance sheet and already holds sufficient working capital to bring Miguel Auza into full commercial production.  This is the result of active equity financings since its IPO.  In June 2006 SEG’s IPO brought in about C$17m.  Then in May 2007 it closed a massive public offering (considering the small size of SEG) that grossed it C$30m.  As you can see in its chart this unfortunately had a significant dilutive effect on SEG’s stock.


     Going forward I hope Silver Eagle Mines considers alternative financing methods if it needs to perform major expansions at Miguel Auza.  As we’ve discussed debt financings are usually a lot less impactful to shareholders than large equity financings.  And if SEG does ever use debt we need to watch out for potential hedging.  While test mining concentrates are currently sold to a local Peñoles smelter, it’s hard to say how the sales of a larger volume would be structured.  This will be something we need to monitor if Miguel Auza is commissioned for larger-scale operations.



Market Cap


P/E Ratio


52-week Low


52-week High


US Exch-Symb


CAN Exch-Symb


Working Capital


Operating Mines


Devel. Projects


Explor. Projects


Silver Reserves


Silver Resources

17m oz

2007 Production


2008 Est. Prod.


Mkt. Cap./res-oz


2007 Cash Costs



     The bottom line is Silver Eagle Mines is among the elite junior explorers active within Mexico’s historic silver-mining districts.  And these explorers are having great success finding abundant silver resources in many of the past-producing silver mines.  With Miguel Auza being no exception, SEG has found that this property is teeming with past-producing silver mines.  No less than 17 veins have already been identified as hosting historic mining activity.


     Silver Eagle has made a lot of progress in the last several years redeveloping Miguel Auza and the rich Calvario vein system.  As part of its development work SEG is even operating a small-scale mining operation.  The test mine has been processing the near-surface oxide material and is in the process of converting to the deeper sulfide ore.  This operation has been running in parallel with an aggressive exploration program and is proving vital to better understanding the greater geological structure of Miguel Auza.


     Now small-scale mining operations and only 17m ozs of silver resources might seem insignificant.  But these are big steps in the right direction for a start-up silver explorer.  And these steps are important as they show that SEG is capable of bringing a mine into production.  The transition from pure explorer to mining operations, no matter what the size, is a step that most explorers will never accomplish.  This ought to provide shareholders with a bright outlook for the future of this company and its ability to grow.  Overall I really like SEG as a speculative silver exploration play.


     This profile is provided courtesy of Zeal LLC.  And Silver Eagle Mines is just one of Zeal’s twelve favorite silver stocks profiled in our latest research report.  This report is the result of hundreds of hours of comprehensive research work and it details the fundamentals of these high-potential stocks.  Please purchase this report so you may have the detailed profiles of all these promising silver stocks at your fingertips today.


* Financial information is from the latest available financial statements.

* All data and information presented in this report should be verified for accuracy directly with the company before making a trading decision.


As of June 13, 2008, I, Jason Hommel, own 586,000 shares of stock of SEG.TO, just over 1% of the company, which is also about 10 days worth of average daily trading volume.

Nobody has paid me to promote this stock.
I have not paid Adam Hamilton to write this report.

Our profile on Silver Eagle Mines can be found here: