We don’t normally invest in large companies however, when quality dictates we make an exception.

This company has so much going for it that it is a must for any portfolio containing silver mining stocks. Coeur d’ Alene Mines Corporation is one of the largest producers of silver with the added kicker of considerable gold production. Last year this company produced approximately 14 million ounces of silver and just over 130,000 ounces of gold. Their cost of producing silver was close to $4.26 per ounce of silver. Going forward Coeur has not hedged any of its silver or gold production so the stock price will be sensitive to any upward or indeed downward movement of the metal. As believers in the upward direction of both these metals then unhedged stocks are the ones that will give us the biggest boost.

Geographically, Coeur have operations in the U.S., Australia, Argentina, Alaska, Chile and Bolivia. As owners of large parcels of land in South America where exploration is being undertaken the possibility of new discoveries adds to the excitement.

The geopolitical situation in Bolivia does present a risk with the recent government statements causing a sell off in this stock. However, according to Reuters, Vice President Alvaro Garcia has stated that although the government would have a larger role in the industry, he ruled out nationalization similar to that in the oil and gas sphere. It would appear that higher taxation is on the cards but that should manageable. It should also be remembered that their operations in Bolivia are only a part of a much bigger enterprise.

At the start of this year Coeur had silver reserves amounting to 221 million ounces, and gold reserves of 1.3 million ounces. Coeur has a market Capitalisation of $1.215 billion and a P/E ratio of 54 and is currently trading at $4.85 having been above $7.0 before the market sell off. From the chart below we can see that the price has been making steady improvement and is now sitting on its 200 day moving average. By Christmas this stock will be considerably higher so we are buying now regardless of the talk of ‘seasonality’ pullbacks through July and August. Once the herd thinks it can wait it is probably the wrong decision.

You can purchase this stock on the NYSE, symbol CDM or on the TSX, symbol CDM.
07 July 2006