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« Silver Standard Resources Inc. | Main | Hecla Mining Company »

Pan American Silver Corp


Pan American Silver Corporation has a very simply put mission statement: to be the best vehicle for equity investors wanting real exposure to higher silver prices.
This company also plans to become the largest primary silver producer in the world with annual silver production growing to 25 million ounces per year by 2009.

Pan American currently produces more than 12.5 million ounces of silver annually from 6 producing mines in 3 countries. It is constructing two additional mines, one in Mexico that will be operational by the end of 2006 and one in Argentina that is expected to commence production in early 2008. They have also managed to keep a lid on costs and can produce silver for less then of less than $3.50/ounce. If we assume that silver bullion will stay above the $10.0 level then Pan American’s stock should do very well indeed.

Another factor, which influences our decision to invest, is whether or not the company has good exposure to the price movement of silver. Pan American has never hedged any of its silver production and does not intend to hedge any of its silver production in the future, which makes it an ideal investment for us. We are precious metals investors seeking generous stock price growth and as such are prepared to take a calculated risk with the view to reaping excellent rewards. Geographically this company operates in Peru, Mexico and Bolivia. The fashionable South American swing to socialism and possibly the nationalisation of some of its industries is a risk that needs to be constantly monitored.

Pan American stocks are traded on the NASDAQ under the symbol of PAAS and on the TSX in Toronto under the symbol of PAA. They are the only silver company to trade on the Philadelphia Gold and Silver Index, known as the XAU and form part of the S&P/TSX Composite Index. If you consider yourself to be a hyper-investor you could try your luck trading Pan American on the Chicago Board Options Exchange. This we may cover later but options’ trading requires strict discipline and balls of steel, unless you enjoy sleepless nights.
Look out for Pan American Silver’s Q2 results on o2 August 2006 after market close, they should make exciting reading.

From the chart we can see that the stock has bounced from the $16.0 level and is now approaching the 200-day moving average. Some of you may prefer to wait until the stock has consolidated above this average, which is fine. However, we are adding to our holdings at this level.


16 July 2006

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