Metalline Mining (MMG – AMEX)

Dear Bottarelli Research Member,

Let’s start off today’s bulletin with Dendreon (DNDN – NASDAQ) and try to understand the FDA’s thinking. Like you, I was totally shocked by their request for more information. I spent some time this week speaking to the doctors that are part of my inner research circle, and all I heard from them (aside from the disappointment of their investment) was the true loss that’ll be sustained from the patients that have late-stage prostate cancer. As it stands today, these patients now have no other way to extend their lives — and that is truly the most devastating blow of all.

I’d like to be honest at how I’m looking at this. It may take DNDN a long time to get all the information that the FDA wants. And then it’s a question of whether or not the FDA will even accept this new data. For now, the smart thing to do would be to hold your DNDN June 10 Puts (UKO RB) and see how far DNDN drops. If the stock falls further (and it very well could) you’ll have a gain well over 100% on your puts — and we can take that money and run. In fact, as I write you today, we’ve already hit the 100% profit level on this protective position, and it could go even higher.

It’s also important to remember our rule for scaling into small cap positions like this. I recommend taking a one-third position to open up any new play, and then adding to this position as the stock moves higher. In the case of DNDN, we advised that you take a small position — and we even suggested taking some profits off the table when the stock jumped from $15 to $21. Do not be afraid to take half of your profits off the table on fast-movers like this! Locking in gains (while letting the other portion of your position ride) is a smart idea in volatile positions like this.

I will continue to dig for more insight about the questions the FDA wants answered, but I do not want to hang around and watch DNDN go back to $3.00. Remember, we originally entered DNDN for $3.27 and watched it quickly move all the way up to $25.00, so the potential for a very big move is still possible. But for now, I think the best course of action is to take our hit on the stock, hold the puts, and move on. Bryan will get into this in his section below — but remember that this week’s setback does not mean that DNDN is dead in the water. In fact, we may revisit it at a later date because they are very, very close to an approved treatment. But this investment play is no longer about a prostate cancer treatment — it’s now about momentum traders taking this stock over. That’s why I’d like to temporarily close off the stock position and move on to the other small cap winners I have lined up for you — which leads me into this week’s newest pick.

I want to share with you a true “little gem” with approximately $10 billion in zinc already proven. Folks, this is huge! Not only that, but this tiny stock also has lead, copper, and silver. I simply cannot recall a company with such tremendous upside potential. And since their properties are located in Mexico, you don’t have to worry about operating in hostile areas such as Bolivia, Africa, or even Venezuela. What’s more, their mine already has infrastructure in place, including electric, railway, water, and local workers with experience. I’ve studied a lot of early-stage mines in my lifetime, and none of them have come with such tremendous infrastructure already in place.

As I was pouring over their numbers, I learned that this company just completed a feasibility study and encountered high-grade silver on top of what they have already reported. As it stands today, I’m not convinced that management has reported the full numbers as to the amount of silver they could potentially have — so buying shares today is just like getting their tremendous silver deposit for free!

All things considered, there is no doubt in my mind that this company is being grossly overlooked by the investing public — and the risk/reward scenario is well in your favor. The combination of their undervalued stock price, the fact that their mining infrastructure is in place, their Mexico exposure, and their proven reserves in zinc (not to mention their under-reported high-grade silver) looks to me like we truly have a big- time winner on our hands. It’s time to jump on board now!

As you know, I usually say nibble away, but this time you may consider adding a little more than usual. Instead of buying in thirds, let’s start off by adding a half position right off the bat. I’m convinced we have a tiger by the tail, so let’s start off strong. Now are you ready for this? If the new commodity boom takes place, you could easily see this $3.70 company trading in the $30.00 range. I kid you not. In fact, $30.00 per share may be a conservative price estimate.

The company is Metalline Mining (MMG — AMEX). Buy it while you can under $3.70 per share. I believe we have an easy double this year, and maybe a whole lot more. And with that I’ll turn things over to Bryan.

My friend, what do you think about this little hidden gem?

Sincerely,

“Available Zinc Inventory Will Go to the Highest Bidder”

- Metalline Mining, quoted from Web site

Let me start off by giving you my take on Dendreon (DNDN – NASDAQ).Like Mark mentioned, it has been a wild ride — and this latest news is just another obstacle in the long and difficult road for smaller biotech firms to bring a drug to market. It’s important to note that the FDA did not say that Provenge is dead in the water. It’s not.

The FDA has simply requested more information. After all, the FDA needs to be 100% sure that anything they approve is rock-solid. Even if they’re 95% sure — or even 99% sure – they still need more information to put them over the top, and this is what happened with DNDN. It was a tough blow, for sure, but I think the stock still has a lot of life left in it. After all, don’t lose sight of the fact that the FDA’s expert advisory committee voted 17 to 0 in favor of the safety of Provenge and 13 to 4 in favor of the efficiency of Provenge. These are strong numbers from the leading experts in their field. And considering more than one million men in the United States have prostate cancer, and 218,890 new cases are expected to be diagnosed this year, this is a treatment that everyone, from patients to doctors to even the FDA, wants on the market.

More than 27,000 men will die this year from prostate cancer — and the treatment options are severely limited for advanced, metastatic prostate cancer. Provenge could be the one and only late-stage treatment solution. It’s an entirely new class of active cellular immunotherapies (ACIs) that stimulate a patient’s own immune system — meaning Provenge helps a man’s immune cells recognize a foreign antigen and attack those harmful cells. If DNDN provides the FDA the information they need, the stock could easily be “in play” again with another move up to $25.00 and beyond. So this story is not over. But for now, I’d like to trust Mark’s judgment and hold the DNDN June 10 Puts (UKO RB), which are currently up 100%, and close out the stock position.

Having said that, let’s now move on to today’s new play on Metalline Mining (MMG — AMEX)…

I’ve spent this week researching zinc, and I’d like to take a quick moment to give you a brief recap of my findings. As a general “summary statement,” I was shocked to learn just how important zinc is on a worldwide scale. I was also shocked to see how much zinc prices have increased with minimal fanfare or media coverage — so let’s drive right into this week’s new investment opportunity.

Zinc ranks fourth in world metal consumption behind iron, aluminum and copper. It is used to coat steel, and it’s also used as a rust inhibitor. A typical car, for example, uses about 22 pounds of zinc — and the auto sector accounts for 50% of total zinc usage. Construction and manufacturing of alloys, bronze, and brass account for 20% of total zinc usage and 15% goes towards die casting in appliances, computers and tools. The remaining 15% goes towards batteries, tires, rubber goods, paint pigments, ceramic glazes, cosmetics, pharmaceuticals, and chemicals. So, as you can see, zinc is extremely important for a wide range of consumer products.

Here’s where things get interesting: After years of over-supply, the zinc market now faces a supply deficit like never before. In fact, zinc supplies right now are at their lowest levels since March 1991 — and this is pushing prices higher.

The reason for the supply imbalance is that older zinc mines are now being shut down because their ore bodies are depleted, yet no major mines are being opened to replace this lost demand. The net result is zinc production that is experiencing a down-cycle during a period of rising and unprecedented demand.

Exacerbating the zinc supply problem is China, whose high levels of capital investment growth further skew the supply/demand equation, subsequently pushing zinc prices higher at an abnormal rate. Just look at this zinc price chart and you’ll see what I mean:

As you can see, the current supply/demand imbalance that we’re facing has caused zinc prices to more than triple in the last two years — and that’s why Metalline Mining (MMG — AMEX) looks positioned to be such a tremendous winner.

Since zinc reserves are being depleted faster than new production is coming online, MMG is in a position of power. According to their company projections, there will be no zinc supply solution until after 2015 — meaning that no major new discoveries are on the horizon for the next eight years. Nevertheless, demand must still be satisfied at any price. In other words, MMG understands that they’ll be able to sell their available zinc to the highest bidder, and they plan to take full advantage of this unique situation using a project called Sierra Mojada.

You see, MMG is about to initiate an aggressive zinc exploration program that is capable of coming online in the next few years. Metalline’s Sierra Mojada Project is located in Coahuila, Mexico and consists of 17,563 acres with a proven history of high-grade silver deposits — not to mention copper, lead, cobalt, germanium, and of course zinc. Since they own 100% interest in this project, our research suggests that any positive results could double — perhaps even triple - this stock in a matter of months. And when you throw into the mix the under-reported silver deposits (that Mark outlined above), you’re buying a truly “under the radar” metals gem ready for explosive upside growth. All it takes is one discovery announcement to re-rate the shares to the upside, and we want to be positioned to ride this up-wave now.

MMG is up 223.81% over the last 52-weeks — which tells me that it’s in the early stages of its tremendous upside potential. With a 52-week high of $5.67, you’re able to get in now at a very attractive entry price.

All things considered, I think MMG is a strong stock to add to our small cap ledger as a pure play on zinc shortages — with an added bonus of silver and other precious metals.

PLAY: Buy shares of Metalline Mining (MMG – AMEX) at or under $3.70, good for the week.

Sincerely,