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Tuesday
Jul112006

Hecla Mining Company

How far can Hecla fly as silver and gold prices race for the moon?


This company is first and foremost a silver miner producing over 6 million ounces of silver last year. It also produced 140 000 plus ounces of gold in 2005 so we think it will experience a double whammy as we expect both silver and gold to make to great progress.

Hecla Mining has been around for over 100 years and is a low cost primary silver producer in North America, producing 6 million ounces of silver at an average total cash cost of $2.96 per ounce in 2005. This silver miner has a very good cash flow which is not only important from a profit stand point but it also helps fund new exploration activity. Investors dream of waking up one morning to the news that their company has just made a very important strike and Hecla could just be that company. Hecla’s exploration prospects, superb management, negible debt and solid cash position make this an excellent precious metals investment stock.

Geo-politically, Hecla is active in the United States, Mexico, Venezuela and Alaska, which is just fine by us.
Hecla’s common stock has been traded on the NYSE for approximately 40 years under the symbol “HL” In the first quarter of 2006 Hecla recorded earnings in excess of $38 million.

The chart shows that the stock has recovered from the market pull back and is just above its 200-day moving average. This presents us with an opportunity to purchase at these levels before it takes off.
As of 05 July this mining stock has a Market Capitalisation of $628 with a P/E ratio of 35 and closed at $5.27.

HeclaChart1

We think that the downside for this gold and silver mining stock is minimal compared to the upside potential, which should be very exciting in the very near future along with the rise in silver prices.

05 July 2006.
Tuesday
Jul112006

Silver Wheaton

SLWlogo1


Silver Wheaton is a new innovation in that it is a silver only company and does not own or operate any mines.

Its total revenue is derived from silver sales, which it acquires from gold and base metal mining companies as a by-product of their operations. This is the only company that we are aware of that operates in this manner. Its position is unique in the market place. By placing contracts with other miners for their silver at favourable rates and selling on to the general market they have created a terrific niche for themselves. Silver Wheaton plans to sell some 15 million ounces of silver in 2006 at cash costs of $3.90 per ounce. With silver currently north of $10.0 they are in a remarkable position for generating profits.

So, where does the silver come from? Well, they have contracts with mines in Mexico, Sweden and Peru. In Mexico silver comes from the Luismin Mines, in Sweden from the Zinkgruvan Mine and in Peru from the Yauliyacu Mine.

As we prefer mining stocks that do not forward sell their metal in an attempt to lock in current silver prices, Silver Wheaton fits our investment criteria. Silver Wheaton is totally unhedged and is therefore totally exposed to the price movement of silver. In our opinion the Bull Market in silver has a long way to go before the new record highs are reached so this stock is on our shopping list. We do currently hold a small amount of this stock but we failed to buy it after the sell off when it was under $8.0, sometimes you need balls of steel but on this occasion we lacked the courage to dive in and buy. That said, it is impossible to get in exactly at the bottom on every play however, to stay on the side lines could to be miss this opportunity altogether.

Silver Wheaton has a Market Capitalisation of $1.5 Billion, a P/E ratio of 49 and closed yesterday at $9.41.

From the chart we can see that the stock has bounced on its 200 day moving average and recovered very well indeed from the recent sell off. We will enter the market again at these levels and hold regardless of any further downward movement in the stocks price. By Christmas this year we expect Silver Wheaton to have been discovered by the media and be trading well above these levels. By April next year we will be looking for a doubling in the price of this stock.

SLWchart1


Silver Wheaton Corp. (TSX: SLW, AMEX: SLW) has also recently been listed on the New York Stock Exchange (NYSE: SLW).

08 July 2006
Tuesday
Jul112006

Coeur d’Alene Mines Corp

CoeurLogo1

We don’t normally invest in large companies however, when quality dictates we make an exception.

This company has so much going for it that it is a must for any portfolio containing silver mining stocks. Coeur d' Alene Mines Corporation is one of the largest producers of silver with the added kicker of considerable gold production. Last year this company produced approximately 14 million ounces of silver and just over 130,000 ounces of gold. Their cost of producing silver was close to $4.26 per ounce of silver. Going forward Coeur has not hedged any of its silver or gold production so the stock price will be sensitive to any upward or indeed downward movement of the metal. As believers in the upward direction of both these metals then unhedged stocks are the ones that will give us the biggest boost.

Geographically, Coeur have operations in the U.S., Australia, Argentina, Alaska, Chile and Bolivia. As owners of large parcels of land in South America where exploration is being undertaken the possibility of new discoveries adds to the excitement.

The geopolitical situation in Bolivia does present a risk with the recent government statements causing a sell off in this stock. However, according to Reuters, Vice President Alvaro Garcia has stated that although the government would have a larger role in the industry, he ruled out nationalization similar to that in the oil and gas sphere. It would appear that higher taxation is on the cards but that should manageable. It should also be remembered that their operations in Bolivia are only a part of a much bigger enterprise.

At the start of this year Coeur had silver reserves amounting to 221 million ounces, and gold reserves of 1.3 million ounces. Coeur has a market Capitalisation of $1.215 billion and a P/E ratio of 54 and is currently trading at $4.85 having been above $7.0 before the market sell off. From the chart below we can see that the price has been making steady improvement and is now sitting on its 200 day moving average. By Christmas this stock will be considerably higher so we are buying now regardless of the talk of ‘seasonality’ pullbacks through July and August. Once the herd thinks it can wait it is probably the wrong decision.

CoeurChart1

You can purchase this stock on the NYSE, symbol CDM or on the TSX, symbol CDM.
07 July 2006
Tuesday
Jul112006

The Case for Silver


We believe that silver is a precious metal as well as an industrial one and at the moment is one of the cheapest in the market place. Silver also has many uses, not just decorative as in jewellery but also industrial uses such as photography, which account for approximately 95% of the annual silver consumption. Silver is top of league in terms of conductivity of light and electricity. It is easy to work with and can be shaped to almost any requirement. Silver is highly resistant to corrosion and requires little in the way of maintenance.

The balance of supply and demand is now affecting the price and silver fabrication has grown rapidly while mine output has not. To meet demand suppliers have had to run down their stockpiles. However this solution has only a limited time scale before it becomes depleted thus limiting the supply and forcing prices up. The constant devaluation of currencies worldwide adds to silvers value as a store of wealth and a hedge against inflation similar to its big brother, gold. Many of the arguments related to gold also apply to silver and as gold continues on its own upward path so will silver and it may outperform gold before this Bull Run draws to a close.

Geographically the top five producing countries according to the Institute of Silver are: Peru, Mexico, Australia, China and Chile. The geographic location will be a consideration when we are looking for mining stocks to invest our hard earned cash. The political stability of each country and their government’s acceptance of foreign investment is an important factor. The South American ‘swing’ towards a socialist way of thinking needs to be monitored on a regular basis. It would not be the first time that a government would use the nationalisation of an industry to take the spotlight off its own ineptitude.

SilverChart1


Our intention is to review various silver mining companies and post articles of the stocks that we are buying.
You are invited to comment on these investment decisions as you think fit. It may be that your own research has uncovered a gem and our readers will then benefit from your input.
11 July 2006
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