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« Is the Treasury Out to Kill Money Market Funds? | Main | Gold Going to $1500/oz – John Embry »
Sep162009 Portfolio Update 17 September 2009

Silver Chart 17 Sep 09.JPG

Chart courtesy of Stockcharts

In the last update back in June we wrote that July and August could present us with a dip which should be used as an opportunity to acquire a few more of your favorite shares, as we still anticipate that both gold and silver prices will set new records before this year is out. Well September has now ushered in a massive surge in silver prices. July saw silver trade at sub $13.00/oz and yesterday silver closed at $17.40 registering a gain of around 34%. As we can see from the above chart the technical indicators are banging their heads against the ceiling which is a bit of a worry, however, both the 50dma and 200dma are heading north in parallel which is a positive sign.

All eyes are of course on gold as it circles the US Dollar in anticipation of further declines.

The silver producers joined in the fun too and put on impressive gains which has gone some way to restoring the historical ratio of around 50:1 with gold, it currently stands at around 59:1. The momentum that silver currently has could well help it narrow the gap and even go beyond it if gold challenges and breaks above its previous high of $1033/oz, which we expect it to do.

We are silver bugs and have waited a long time for our silver stocks to show some growth so we are looking through silver tinted glasses at the moment so take anything we say with a pinch of salt. We are still convinced that the best is yet to come and the remainder of the year will put a broad smile on your face.

On the negative side the charts are in the overbought zone so please go gently and be prepared for a bumpy ride from now on.

Our portfolio currently includes a few laggards so we may have to conduct a bit of a cull if we cannot see an improvement ahead and redeploy the cash into those producers that are performing and responding to the increase in silver prices.

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 traded as low as $0.99 and closed yesterday at $4.98. Hopefully Hecla can continue to improve and eventually surpass its previous highs.

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. PAAS has traded as low as $8.93 over the last year and was standing at $18.55 at our last update so some improvement has taken place and PAAS closed at $24.22 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. SLW closed yesterday at $13.22, a dramatic improvement of late.

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 during in the sell off but has recovered and yesterday it closed at $23.34, much to our relief.

Eagle Plains Resources Limited (EPL) – We bought this stock for around $0.53, it has been down to $0.08 but closed at $0.24, at the last update, yesterday EPL again closed at $0.24, sadly it has not joined in the fun and may have to go.

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. Encouraging results helped this stock move higher and yesterday Endeavour closed at $3.21, coming from sub $2.00 a month ago, when we suggested that it was a good buy.

Minco Silver Corp (MSV) - Bought for $2.80 as a speculative move, it later dropped to trade at $0.40, which hit us hard, however it has been showing signs of recovery and during the last update it traded at $2.00, however it closed at $1.87 yesterday – improvement required or it will have to go.

Traders Corner

On 17th August 2009 we wrote the following: We purchased the August 2009 $10.00 PUT Contracts (SLWTB) on 5th August 2009 for an average price of $0.375 per contract and we sold them today for $0.60 for a profit of 60%.

We have no other positions open in the silver space at the moment however.

We will hold on tight to our core position and look for opportunities to deploy our opportunity cash as this new world of money creation continues to debase all currencies, 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. Apart from precious metals we do not hold any other stocks as we are believe that this sector is about to boom.

Have a sparkling week.

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Reader Comments (1)

Sept 17 (Reuters) - Endeavour Silver Corp (EDR.TO) said it will raise about C$16 million through an equity offering to expand its exploration drilling programs and accelerate mine development projects.

The company said it will issue units at C$3 apiece, each unit consisting of one share and one-half of one share purchase warrant.

Each whole warrant is exercisable at C$3.60 to buy one share for a term of two years from the issue's close, the company said in a statement.

The issue is expected to close on or about Sept. 30, it said.

The syndicate of agents for the offering, led by Salman Partners, have an over-allotment option of 15 percent of the units sold, Endeavour said.

In case of over-allotment, the proceeds will increase to about C$18.5 million.

The agents will be paid 6 percent of the gross proceeds in cash and broker warrants equal to 6 percent of the number of units sold.

Each broker warrant is exercisable to buy one common share at C$3.

Shares of the Vancouver-based company closed at C$3.44 Wednesday on the Toronto Stock Exchange. (Reporting by Amit Kumar in Bangalore; Editing by Unnikrishnan Nair)

September 17, 2009 | Unregistered Commentereastwin

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