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Miners: It is not good enough to be good

Having spent a good chunk of my career involved with major construction projects I have gained experience in the Engineering, Procurement and Construction (EPC) timeframes of a variety of projects.

The reason we are bringing this to your attention as investors is in response to our mailbag, which currently has a theme of:

“I bought this mining company a couple of weeks ago and they have not produced any metal yet”
There would appear to be a real problem of understanding and of communication. The investor, who lets face it, is to some extent a gambler by nature brings with him a ‘Track’ mentality. He picks his horse and places his bet, taps his fingers as he awaits the starting gun and bang they are off! A few minutes later he has a result. Fast forward to today and he has heard about the new ‘hot’ money making precious metals sector and he dives in hoping for result by tea time. The result of the mining companies efforts for that day are not visible and even less measurable, so he rings the Managing Director and is stunned to learn that he is clad in a hard hat and boots down a hole in an unpronounceable name of a place in South America. Having not done a great deal of research he is worried that the MD is in Slowbovia, a country stuffed full of revolutionaries baying for the wallets of the investor! Our gallant investor is now having second thoughts about keeping his hard earned cash in such a precarious investment vehicle.

Does he stay or does he go?

The more enlightened mining companies have to some extent realised that they have a problem and have employed someone with ‘Investor Relations’ skills. An unnecessary overhead you may think but the best opportunity in the world will whither and die without the sunlight, in terms of exposure that these people can bring to this party.
Investor relations
Investors need to be fed and your news flow is that conveyor belt which delivers either nourishment or starvation. The frequency and the quality of your content are absolutely vital to the well being of your investor.
In terms of frequency a precious metals mining company should never go more than two weeks without a press release. If your last press release stated that you are about to commence a drilling programme on Supa-project and it will last for three months, then it is no good waiting for a fantastic set of drill results before you prepare another news release. Get a grip of whoever is in charge of Operations and interrogate him until you have a breakdown of the next three months in activities no longer than one week.
Detailed Schedule 1
You can now measure the progress and prepare a news release of some substance. If you have a broad-brush programme without the detailed breakdown to back it up, you are in our opinion amateurs. The success of your project should be predicated upon ‘bottom up’ detailed planning and scheduling data. When we approach companies it soon becomes apparent that there mission might be clear but their road to it is fog bound, so the arrival time is clouded in uncertainty. We are only talking about time you say, believe me Time is Money.

We will now take a quick look at the quality of the news flow. Press releases that talk about an everyday appointment or stock options for Directors are only stocking fillers and in terms of enthusing your customer, the investor, they are about as much use as a chocolate fireguard. As investors we want detailed content, facts, figures, target dates, actual dates and at least some brief explanatory notes. After all we are the owners and deserve to be informed. Without this basic data we are with uncertainty, which is a precursor to negativity. When negativity calls we vote with our feet and withdraw our financial support.

To be a good mining company is not good enough, you need to tell us and keep on telling us how good you are by demonstrating your achievements. Savvy investors are aware that you have many problems to solve and they appreciate being made aware of these problems and the proposed solution, so communicate. Wall papering over the cracks only delays the inevitable and breeds distrust. Lose the trust of your investors and you are history.

To conclude as investors we need to acquire some patience and understanding of the difficulties inherent in mining and as mining companies you need to hone your communication skills. This would go some way to raising confidence levels and stemming the erratic movement of funds.

Silver Wheaton Corp: A 25% increase to 362 million ounces

Silver Wheaton Logo 25jun07

Silver Wheaton Corporation has increased its proven and probable silver reserves by 25% to 362 million ounces and attributable measured and indicated silver resources by 34% to 162 million ounces.

Silver Wheaton Corporation has just announced that Goldcorp Incorporated has updated reserves and resources for their Peñasquito Project located in Zacatecas, Mexico: “The new Proven and probable silver reserves have increased by 50% to 864 million ounces, while measured and indicated silver resources, exclusive of reserves, have increased by 67% to 413 million ounces.”

Silver Wheaton has an agreement to receive 25% of the life of mine silver production from Goldcorp's Peñasquito Project.

This should be good news for Silver Wheaton going forward but as we write the price of silver is trading around $0.20 down on Fridays close which will no doubt out a damper on what should be a joyous occasion.

Just a reminder for those who do not already know that Silver Wheaton is the largest public mining company with 100% of its operating revenue generated entirely from silver production. The Company is on track to reach annual silver sales of approximately 15 million ounces in 2007 with a target of 23 million ounces by 2009. Silver Wheaton is un-hedged which is something we find attractive as it gives us the greatest exposure to the price of silver.

Endeavour Silver Corp: Finding that entry point!

This period of the summer doldrums along with the negativity that currently infests the precious metal market should be viewed not as a problem but as an opportunity.

We were fortunate to make an investment in Endeavour at $3.97 as this silver investment soon rose above the $5.00 level. However with silver prices going sideways another opportunity would appear to be upon us as Endeavour has pulled back to $4.62. Now bear in mind that is not possible to hit the bottom bang on or to get out at exact top of the chart we would like to be fairly close. We see Endeavour as being a good buy right now and those who don’t want the anxiety of stalking this silver investment might want to buy now, which we think, is fine to do. However we think that the next week or so may well present us with an investment opportunity of around $4.50. If so we will buy again.

Also bear in mind that we are not good at ‘patience’ but we will try and wait for this opportunity to materialise before we pounce on it.

We also see June as being a lacklustre month for precious metals but the second half of this year should bring us a reward for the work that we are doing right now.

Have a good one.

Minco Silver Corp: Appears to have formed a base

Minco Chart 18jun07

On the 27th April 2007 we acquired our first small purchase of Minco Silver Corporation partly in order to gain some exposure to silver exploration and mining in China.

Well since making our purchase this stock has dropped to trade at $2.17 on the TSE. As we said in our article entitled: “Minco Silver Corporation: An opportunity in China” we were making only a small investment at that time, as this is a precarious business at the best of times and Minco is a more adventurous move us for us as we have preferred to stick with the more solid silver producers. Anyway our intention is to make a further investment in Minco so we are now watching it very carefully indeed in order to detect any hint of a reversal in Minco’s fortunes.

From the chart above we can see that Minco appears to be forming a base, which is good sign. Also note that the technical indicators have visited the bottom of their respective ranges and are now trying to head north.

The company has also has retained SRK Consulting to prepare a Preliminary Economic Assessment for the Fuwan Silver Project. SRK will provide the skills required to reach the level of detail needed to meet Canadian standards in accordance with National Instrument 43-101 guidelines. This should be done in about three months and should certainly add some meat to the bone in terms of raising investor confidence levels.

We expect a buying opportunity to arrive in the next few weeks and we will post as soon as we think that it has arrived.

Hold on through this period of sombre summertime it will soon be behind us.

Minco Silver Corporation trades on the Toronto Stock Exchange under the symbol MSV.

Silvers Golden Cross

Technical indicators are not perfect and if they were we would all be fat and happy.

Silver 3rd June 07

However when we see a chart formation such as the one above that silver recently formed it does give us reasons to be cheerful. From this chart we can see that the MACD black line has just crossed over the red line in an upward move, sometimes referred to as the golden cross. If we back track through silvers history we can see that this is usually followed by a substantial move upwards in the price of silver. It will be interesting to observer silvers behaviour over the next say four weeks and see if silver conforms or not. Our hunch is that it will but short term trading is always very difficult so if you do decide to invest based on this type of indicator then pick a quality silver stock that you would like to own anyway. Then you wont be too disappointed if she misbehaves.

Silver stands at $13.74 today so we will check it out again on the 3rd of July 2007.

Silver: Formed a base?

The last few days has seen silver form a base from which the beginnings of a rally can be detected.

Silver Chart 01 June 2007

We normally do not like to look at silver on such a micro level but this chart could be telling us that silver has indeed found some support on which to base a rally. We could still experience some more of the sideways action typified by the summer doldrums but May is now behind us giving us some room to feel a little more optimistic about the future.

As we can see from the chart, silver appeared to form a double bottom at the $12.80 level and as we write has moved up to $13.52 for a gain of $0.72 or 5.6% since the 24th May 2007.

Although this is a small move and could reverse as silver has often done in the past, we see this as an indication of better things to come. So if you have a few favourite silver stocks start accumulating now even if it is only a few for now and then buy again a little later down the line when you are more confident that silver is actually on the move.

SILVER: A Testing Time for Silver Stock Holders

Once again silver takes a breather and rests on its 200-Day Moving Average. This average has proved to be more or less silvers support area over the past few years, but will it provide that support as we enter the summer doldrums?

Silver Chart 29 May 07

From the chart we can see that silver over the last year has consistently managed to form higher lows when it has been sold off which is an encouraging sign as it indicates silvers underlying strength. You will also notice that the technical indicators are also in their respective negative zones, although not entirely on the floor. Silver may well go lower and take this indicators to the floor which would present us with a fabulous buying opportunity but at the same time it will be gut wrenching for those of us who are already fully invested in silver stocks.

It is almost the end of May so those that normally sell and run for cover are gone by now. And was the sell off devastatingly bad? No just a gentle pull back. However, having hit $15.0 last April it has been a long and frustrating twelve months of watching silver build steadily only to see it drop dramatically during in corrections wiping out most of the gains. Patience is required here as silver teases us regarding which way she will go. Try to remember that if we go back to April 2005 silver was trading at around the $6.0 level, so silver has doubled since then.

The next few weeks could see more of the same with silver churning at these levels giving us no clue as to where she is heading. However in our experience the longer the consolidation period lasts the bigger the breakout when it does arrive.

Finally we remain confident that silver will head north from this point and we will keep a firm grip on the silver stocks that we already own with the view to accumulating more should a suitable ‘Dip’ present itself.

On spikes we also expect silver to outperform gold so look out for silver ‘out doing’ gold through whip lash style movements which will drag silver stocks onto the lips of every analyst needing a career boost.

Endeavour Silver Corp: Watch for Buying Opportunity


Endeavour Silver Corp Chart

Endeavour Silver Corporation is one of the recent additions to our silver stocks portfolio when we were fortunate enough to make our first purchase at under $4.00.

As you can see from the chart above the fall in the price of silver has resulted in some profit taking, resulting in the stock price retreating to around $4.92 on the AMEX Stock exchange. The next month or so could be rather slow for precious metals in general so we could get another opportunity to accumulate more of this silver producer at advantageous price levels. We doubt that we will see sub $4.00 again but $4.00 to $4.50 would still be a bargain in our eyes.

In a report published this week the company outlined their performance for the quarter in which a couple facts stood out for us:


“The cash cost per oz of silver produced for the 1st Quarter 2007 was US$5.85 per oz compared to US$6.13 per oz in Q1 2006.” This shows that the company is driving costs down which will pay real dividends as the silver price rises and their profit margins increase.

“Reserves tripled at Guanacevi to 9.93 million oz silver and resources also tripled to 21.06 million oz indicated and 9.99 million oz inferred.” This shows that they are discovering more silver and adding value to their reserves.

This is a producing silver mine where the future becomes brighter with every news release. We are of the firm opinion that silver itself is set to move higher once these current doldrums are behind us so we will look to accumulate on any dips over the summer.

Endeavour Silver Corporation trades on (TSX: EDR) (AMEX: EXK) (DB Frankfurt: EJD)

Silver: May 2006 verses May 2007

Silver Chart 14 May 07

Last May 2006, we saw the “sell in May and go away” crowd in action and wondered if we would see a repeat of this sell off in 2007. The truth is that we do not know what the herd will do but we do have a couple of observations that show that Silver is in a vastly different position this year to last year.

Taking a look at the chart for the time frame in question we can see a number of differences between May 2006 and May 2007.

We will look at May 2006 first.

We can see that the price of Silver had raced ahead of its moving averages leaving the 200 DMA a long way behind. In fact the difference between the Silver price at $15.00 and the 200 DMA at $9.00 is approximately $6.00. You can see that this is a huge gap overdue for a correction.

Also note where the technical indicators are: The RSI, the MACD and the Stockastics are all above their middle point with two of them banging on the ceiling. This is telling us that this is an overbought situation.

Now we will look at May 2007.

The price of Silver has made steady progress over time taking the moving averages along with it for the ride. The price of Silver is at $13.00 and the 200 DMA is also at $13.00 so the difference is only a few cents and not the massive disparity that we saw a year ago. This tells us that the price of Silver has not run too far ahead itself as it did in May 2006.

Now note where the technical indicators are: The RSI is close to 30, the MACD is neutral and the stockastics are heading south towards the 20 level. In summary they are more or less telling us that silver is over sold, which is dramatically different from the overbought situation of May 2006.

These are just observations that we can add to our deliberations while trying to decide which course of action we should take. However it suggests to us that if there is a sell off this May then it could be a mild one lasting for a short time only. Gold is also in a similar position and in our view any sell off will also be short lived. This could just be the buying opportunity that you have been waiting for?

Silver Portfolio Update: 08 May 2007

The following is an update of our portfolio of silver stocks enabling us to see where we are and where we go from here. We are very pleased with the progress to date and have added two new silver stocks since the last update.

Below is a list of what we have and a record of the progress that has been achieved to date.

HL $8.61 BUY
Bought for $5.27 has gained 63.38%

PAAS $28.81 BUY
Bought for $18.00 has gained 60.06%

SLW $12.40 BUY
Bought for $9.41 has gained 31.77%

SSRI $38.34 BUY
Bought for $19.98 has gained 91.89%

EPL $C0.82 BUY
Bought for $0.53 has gained 54.70%.

Two new additions are as follows:

EXK $5.37 BUY
Bought for $3.97 has gained 35.26%.

MSV $C2.41 BUY
Bought for $2.80 has lost 13.90%.

As you can see we do not invest in hundreds of silver stocks and we have been content to accumulate slowly those stocks that we think are quality and were undervalued at the time we made an investment. Of the two new additional stocks Endeavour Silver has made terrific progress since we made an investment on the 5th March 2007 with a 35.26% increase in just two months. Minco we bought on the 24th April 2007 so it is early days for this new entry. It is always difficult to buy right on the bottom as we did with Endeavour but we think that the worst is now over for Minco and look forward to some consolidation before it begins to climb.

As for silver itself we believe that we are within touching distance of an upward breakout followed by a run to $20.00. We know that the summer is upon us but we think that any selling will be mild and short lived so our intention is stay with it and hang on in there.