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« There’s Always a Silver Lining | Main | Coeur D’Alene Mines: Watch! »
Mar092009 Portfolio Update 08 March 2009

As we write silver is trading at $13.30/oz, gold is trading at $938.00 and the DOW is hovering just above the 6500 level. The financial turmoil continues with the flight to cash alive and well as noted by the current strength of the US dollar. The demise of The Bank of Scotland and The Bank of America has been followed with the virtual nationalization of Lloyd Bank in London. The financial sector is again on to the back foot as more revelations fall out of their balance sheets. Stimulus packages come thick and fast such as the programme of asset purchases of £75 billion financed by the issuance of central bank reserves in the UK. Not just paper money, electronic money is being created faster then the speed of light

Our view is a little old school in that we believe that once this deflationary blip passes, inflation will be upon us like a raging storm, why else would the US administration recruit Paul Volker, the famous inflation dragon slayer of the early eighties?

Here is a summary of the silver stocks we are currently invested in or following:

Hecla Mining Company (HL) – Initially we bought this stock for $5.27 - a quality silver stock which was going along nicely and then we thought Hecla was overbought, as it hadn’t corrected with other silver stocks, therefore we took profits on Hecla at $11.89, the stock price then dropped so we bought it back at $9.72, getting a 18% discount on our shares. On the 14th April we sold 50% of this stock for $11.79 in order to lock in some profits as we anticipated a fall. On the 18th June 2008 we re-purchased Hecla’s shares for $9.61. Hecla closed yesterday at $1.27. As we wrote recently 'The following news release was received like a lead balloon by investors today taking the stock price down 15.67% . The average volume of trades is 4.39 million however today that number rose to 19.95 million which tells us that the stock holders decided to dump the stock. This post referred to Hecla's latest financial arrangements which are not viewed well and also the current and future dilution of stock by the rapid increase in the number of shares being made available. Maybe the bad news is now out and we can hope for better things, but overall still very disappointing.

Pan American Silver Corporation (PAAS) – Initially we bought this stock for $18.00 and on the 23rd August we gave another BUY signal on PAAS when we said “We made a further purchase today at $24.10” giving us an average purchase price of $21.50. On January 31st, 2008 we sold about 50% of our shares for an average price of $36.65, locking in a profit of around 70.32%. On the 18th June 2008 we re-purchased PAAS shares for $31.06 and on 16 July 2008 we made another purchase at $36.53. They were trading at $9.96 three months ago but have improved recently to close at $14.32 yesterday.
Silver Wheaton Corp (SLW) – Originally bought for $9.41 and made another purchase on 15 July 2008 at $15.61 and a further purchase on 6 August 2008 at $11.43. We are slightly relieved to see the stock close yesterday at $6.63.

Silver Standard Resources Incorporated (SSRI) Initially we bought this stock for $19.98 and on the 20th August we gave another BUY signal when we wrote “we think Silver Standard is at a good level to buy at the moment and we bought today at $28.99” giving us an average purchase price of $24.48. On January 31st, 2008 we reduced our exposure by selling around 50% of SSRI for an average price of $34.82 locking in a profit of 42.22%. SSRI dropped to $7.99 two months ago during in the sell off but closed yesterday at $13.82 having traded as high as $19.08 during the interim, restoring some of our confidence.

Eagle Plains Resources Limited (EPL) – We bought this stock for around $0.53, it has been down to $0.08 but closed on Friday at $0.15, improving slightly since the last update. We will continue to hold for now and keep a close eye on it.

Endeavour Silver Corp (EXK) – We initially bought Endeavour for $3.97 and on 7th December 2007 we bought more shares saying; “EXK is down from over $5.50 and as it has been beaten down so much we are signaling a BUY again on this stock and we made a further purchase bringing our average price to $4.10 per share as we doubled our position.” we secured EXK for $3.26 on the 2nd April 2008. This purchase being the largest we have ever made in EXK. Three months ago EXK closed at $1.02, another victim of the sell off despite encouraging results and yesterday the stock closed at $1.29 having traded at $1.80 recently.

Minco Silver Corp (MSV) - Bought for $2.80 as a speculative move, three months ago it closed at $0.40, which hit us hard, however it is showing signs of a recovery and closed yesterday at $1.24. Again we will continue to hold and hope that it can remain above its 50dma and continue to head north.

Traders Corner:

Our purchase of call options on Hecla mining has failed dragged down by the poor performance of Hecla and are now worth only a few cents each.

We continue to look for short term trades on silver and silver stocks as we have done in the past. However, the ‘Obama’ effect has failed to materialize and boost the market in general. We are in observation mood and will try and remain patient during this world full of financial turmoil, the outcome of which we expect to be the continuing demise of the dollar and an ever-increasing recognition of both silver and gold as the only place to be.
Have a sparkling week.

Stay tuned for updates in this fast moving market…

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