More Upside for this Junior Mining Play

Seven months ago, I was having dinner with a group of Vancouver stock brokers and venture capitalists at a tragically hip club in South Beach.

When the check came... everybody had "penguin arms."  In other words, nobody reached for their wallets to pay for the group's overpriced meal.

A year prior, that probably wouldn't have happened.

The Vancouver Stock Exchange is the birthplace of the junior mining sector. . . and in 2007, it was sitting at record highs.

But in December of 2008. . . with the Vancouver stock market getting killed, promoters and investors, who once were on waiting lists for Porches and Audi R8s, were now getting busted out by bone-crunching margin calls that would literally send them into bankruptcy.

Only one guy in the group was smiling.  He had gone short in September. . . and was now covering.

Champagne for everyone!

This same guy was also the one who said now is the time to buy junior mining stocks. His favorite was Argentex, trading for just $0.11 at the time.

It still is today. . . now trading for nearly $0.70.

I recommended Argentex in these very pages eight months ago. If you followed my recommendation, you're up big.

But in the update below, I will explain why there's even more upside to this junior mining stock.

Argentex Mining (ATX: TSXV, AGXM: OTCBB) is currently in the dark before the inevitable dawn. Within 12 months, I expect Argentex's valuation to reflect a 100 million ounce silver resource on their Pinguino property in the Santa Cruz Province of Argentina.

My 12-month target valuation for Argentex is $70 mil - $90 mil, or $2.00 - $2.70 per share.

Based on an analysis of 98,000 feet of core from a 45-mile vein system, Argentex's management has commissioned a 43-101 compliant engineering report.

I expect the report to describe a 100,000,000 oz. near surface silver deposit with additional gold and indium credits.

Our 24-month target valuation for Argentex is $135 mil - $155 mil, or $4.00 - $4.50 per share.

Due to the 'shovel ready' nature of Argentex's deposit, I expect cash-strapped Argentex to begin production sooner rather than later by taking advantage of proximity to local producers to extract and refine ore in a joint venture agreement.

AngloGold Ashanti (ASX: NYSE), Coeur d'Alene (CDE: NYSE), Pan American Silver (PAA: TSX), Minera Andes (MAI: TSX), and Hochschild Mining (HOC: LSE) are each active in the region and may provide a local source for Argentex's production and refining and a potential exit for shareholders.

Why Now?

Junior miners have picked up steam since PDAC, and Argentex is very much a hot timing play. By acting now, an investor takes advantage of five years of invested capital and a still depressed market for junior miners.

Argentex's management has already conducted extensive drilling programs and I believe that they have identified a near-surface silver deposit in the magnitude of 100,000,000 ozs.

Canadian investor protection laws require an independent engineering report compliant with National Instrument 43-101 to be filed with regulators, to be disclosed to the public before management can describe any aspect of their resource to the public.

Argentex's management has recently commissioned an independent engineering firm to complete a 43-101 compliant report. Results are expected by the end of summer 2009.

I believe that Argentex will appreciate significantly in value when the report is filed and the results are disclosed to the market.

Following the definition of the resource, it is likely that Argentex will expand the definition of the resource with additional drilling― more drill holes along strike might show a continuation or an expansion of the trend―and that Argentex will move towards surface extraction and refining using local third-parties within 24 months.

If you don't have a position, now is the time to take immediate advantage of weakness in the stock and in the market for juniors to capitalize on anticipated catalysts that may drive Argentex up three to four times its current valuation in 12 months, and to eight times its value in 24 months.

I view the Argentex Opportunity in 3 phases:

1) Management has identified a near-surface silver deposit in the magnitude of 100,000,000 ozs. (approximately $1.2 billion, at current prices)

2) I expect Argentex's valuation to increase 250% - 350% when the engineering report is released, based on a 100-million ounce resource and comparable company valuations.

3) With minimal capital expense and impact, Argentex can move from exploration into production within 24 months by initiating surface extraction and refining in an arrangement with either, or both of, AngloGold's Cerro Vanguardia mine (22 miles away), or Coeur d'Alene's Marta mine (50 miles away).