By Justin Kuepper · Monday, October 10th, 2011

Silver Dragon (SDRG): Undervalued after NI 43-101 Report

Silver Dragon Resources Inc. (OTCBB: SDRG) is a metals and mining company focused on the exploration and development in proven silver districts around the world, similar to companies like Minco Gold Corporation (AMEX: MGH) and Coeur d’Alene Mines Corporation (NYSE: CDE). After releasing its NI 43-101 report in September, the company appears to be significantly undervalued.

Dadi Silver Project Could be Worth $55 Million

Silver Dragon’s flagship Dadi Silver Polymetallic project in Inner Mongolia, China could be worth $55 million in today’s dollars, according to a discounted cash flow analysis. The company’s NI 43-101 report showed a 40 g/t cut-off grade that will generate net cash flows over the seven-year project life of $207 million, of which $82 million will accrue to the company (based on Silver Dragon’s 40% interest in the project). The report then applies an annual discount rate of 8% to arrive at the current net present value of $55 million. It should be noted that Silver Dragon has used a conservative 3-year average market price of $21/oz. for silver, which is only 67% of the current spot price of $31.30/oz (10/6/11).

With a market capitalization of just $5.77 million, the company appears to be significantly undervalued given this potential. A valuation of just $20 million – less than half of the project’s net present value – would equate to a share price of $0.133 per share. And these figures do not include the potential from its many other development properties in China.

Just the Beginning: Other Properties and Up-Listing

Silver Dragon recently provided investors with an update on the rest of its properties and has made application for a dual listing on a Canadian stock exchange. These updates signaled strong progress across all of its properties:

• The Erbahuo Silver Mine – Mining is in progress, with work focusing on tunnel development, however over 3,000 tonnes of silver ore have been mined to date. Construction of the ore processing plant is in progress and near completion, which means investors could see some near-term revenues.

• The Laopandao Silver-Tin-Copper Project is undergoing tunneling and testing, and investors can expect to see an NI 43-101 report to be released later this month.

• The Aobaotugounao Silver-Lead-Zinc project is undergoing drilling and three additional holes have been approved within this year’s exploration plans.

• Field surveys are being conducted on its other properties in Yuanlinzi, Zhuanxinhu and Shididonggou.

A Great Investment Opportunity

Silver Dragon Resources Inc. (OTCBB: SDRG) represents a unique investment opportunity. With just one of its projects showing an NI 43-101-backed $55 million net present value, the stock appears to be significantly undervalued. Meanwhile, its other projects continue to progress towards commercialization and long-term value.

For more information, please see the following resources:

• Company Website
• Company SEC Filings