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« SK OptionTrader Banks 15% in 17 days From Treasuries Short | Main | Silver Is Getting Too Popular… Right? »

First Majestic Silver Corp Up 92% since recommendation on the 09 Feb 2011

AG Chart 08 April 2011.JPG

Our purchase at $13.13 on the 9th February for First Majestic Silver Corporation (FR:TSX || AG:NYSE) appears to be have been a timely one as the stock price has increased by 92% in just 2 months.

This dramatic rise has prompted the question from our readership regarding zero cost averaging, whereby we hold until we have a paper profit of 100% and then we sell half of our holdings. This action would take our money off the table and render the remaining 50% of our holding as a 'free' shares.

Conventional wisdom would suggest that this would be the sensible thing to do and we wouldn't blame you if you decided to adopt this strategy. However, you then have to decide where to put the cash and as we know its not easy coming up with winners on every trade that we make. So before you pull the pin and sell and give some thought to just what it is that will trade better than what you have now, you don't want to be in the position of going full circle and deciding that AG is best place for your hard earned cash and you are having to pay a higher price later than you achieved by selling it at this time. Its a close call and its your money so only you can make this decision. For what it is worth we are holding.

We would now like to draw your attention to the above chart which shows just what a super rally it has experienced of late. The technical indicators are now in the overbought zone, with the RSI standing at 80.10, so some sellers have appeared over the last two days or so. However, if we take a look at the position last November we can see that the RSI was similarly overbought with the stock standing at $11.00 and again in December the RSI was very high and the stock was standing at $14.00. So, to have cashed in then would have meant missing the rally that followed to $25.00. This stock is at a record high with no overhead resistance so this run could well continue to higher ground.

If you believe, as we do, that the rally in silver prices is set to go higher then you need to be in this silver bull market. The choice of vehicle is course entirely up to you. Our strategy is a three pronged attack which includes physical silver, a short list of silver producing stocks and a sprinkling of options trades, all of which have served us well.

The news stream from this company is good, which we regard as very important as investors, in order that we can position ourselves accordingly.

The following is an except from First Majestics latest news release:

First Majestic Silver Corporation is pleased to announce that production in the first quarter of 2011 reached 1,825,366 equivalent ounces of silver, representing a 13% increase over the 1,619,403 equivalent ounces of silver produced in the first quarter of 2010. Production during the quarter consisted of 1,769,209 ounces of silver, making First Majestic's first quarter production 97% pure silver, the highest in the silver mining industry.

Silver production in the first quarter of 2011 represents a 25% increase compared to the first quarter of the prior year, and a 1% increase over the 1,757,332 silver ounces produced in the fourth quarter of 2010. In addition to the 1,769,209 ounces of pure silver, the Company produced 1,187,912 pounds of lead, representing a 53% decrease from the first quarter of the previous year, and 351 ounces of gold, representing a decrease of 59% compared to the first quarter of 2010.

Company guidance for 2011 released on January 11, 2011 stated, "Production is anticipated to exceed 7.5 million ounces of silver in 2011". Results of the first quarter are within this guidance. As previously announced, the increasing production for the balance of the year will be achieved by; 1) increasing the blend of fresh ore at the La Encantada operation to 1,250 tpd in the second quarter and to 1,500 tpd in the third and fourth quarters, and 2) the current expansion program underway at La Parrilla is anticipated to result in the flotation circuit running at 800 tpd in the third quarter compared to the current production rate of 425 tpd.

During the first quarter of 2011 the total ore processed at the Company's three operating silver mines, the La Encantada Silver Mine, the La Parrilla Silver Mine and the San Martin Silver Mine, amounted to 456,505 tonnes milled in the quarter representing a 2% decrease over the previous quarter.

During the quarter, the Company completed 7,025 metres of underground development, compared to 5,100 metres of underground development completed in the first quarter of 2010. Development continues to be focused on increasing the reserves and resources and preparation ratios at the three operating mines. Due to the expanding production levels anticipated in 2011 and 2012, the Company's development budget was increased to US$21.74 million in 2011 compared to $12.34 million in 2010.

Diamond drilling programs companywide amounted to 5,793 metres in the first quarter consisting primarily of definition drilling, representing an increase of 1,780% compared to the first quarter of 2010.

Some of the achievements from the first quarter can be found by following this link, please click here.

Finally, should you wish to purchase silver coins and bars as part of your build up of physical silver you can buy direct from First Majestic, please follow this link.


Just a quick note to let you know that in today's trading session we have just closed another winning trade and will do a post about it shortly and also update our charts then.

Over in the Options pit, our model portfolio has managed an average return of 41.23% per trade, 68 closed trades, 66 closed at a profit, or a 97% success rate. Average trade open for 42.76 days.

SK Chart with profits re-invested 29 March 2011.JPG

The above progress chart shows our performance when profits are re-invested, however, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

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