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Silver Stocks: Coiled up and ready to rocket

Buy on the dips is conventional wisdom and usually very good advice; however, we believe an upward explosion in silver stocks is coiled up and ready to rocket.

Some of our silver stocks are a few points off the pace at the moment but that does not worry us. Any chosen entry point into the precious metals market will be accompanied by volatility, some violent swings will occur and you have to decide whether or not you want to ride them out, not an easy decision. The fluctuations around our stock picks are in our humble opinion, of a minor nature so we feel relatively comfortable with them.

What does interest us is the correlation between the movement of silver prices and the movement of silver stocks. If we take Coeur d Alene as an example and compare its progress with that of silver what do find?
The current silver price is $11.38 compared with silver in January of $9.0, a 26% increase in price. The current CDE price is $4.59 compared with silver in January of $4.0, an increase of 14%. This clearly demonstrates a lag between the two. We expect the silver stocks to make up this ground on silver prices in the very near future.

As a strategy, one could continue to purchase on an on-going basis as a form of accumulation. However our interpretation of the market is that we should have most of our cash invested by now, retaining a few bucks should the market present us with a major aberration.

Taking a quick look at the chart below of silver, we can see that the 50-day moving average is trending down towards the 200-day moving average. The next four weeks or so should be very interesting if this convergence continues, no doubt with many commentators saying get out, etc. We are not of that opinion and expect the upward trend that commenced after the recent sell off to continue.

Coeur d Alene is traded in Toronto under the symbol CDM and in New York under the symbol CDE.

28 July 2006

Eagle Plains Resources Limited


If you are a fan of the Joint Venture Business Model, then this aggressive junior explorer is well worth a look. ELP is a creator of projects with Copper Canyon Resources being its latest spin off.

Eagle Plains Resources Limited is a junior exploration company managed by an aggressive management team searching for minerals in Western Canada. The companies’ number one objective is to create shareholder value via acquisition and development of early-stage exploration projects.

At the time of writing this company controls over 35 gold, silver, uranium and base-metal projects with Inferred Resources standing at 38 million ounces silver, 1.2 billion pounds of lead, 1.3 billion pounds of zinc and 48 million pounds of molybdenum. This is not purely a silver play, but a silver play with the added kicker of substantial base metal opportunities and a management team possessing a keen eye for growth. Three projects of this nature are currently being advanced, exposing EPL to approximately $8 million in exploration over the near term.

As investors we see this as a vehicle offering multi-project opportunities. Some will no doubt prove to be fruitless, but the others will provide excellent exposure to both the base and precious metals markets. In such early stage investments the risks are higher than a straightforward investment in to one of the larger, better known companies. However, the leverage that can be generated through the involvement of a joint venture partner who brings the project from feasibility stage up to an operational mining company can be fairly dramatic.

Eagle Plains history shows that they have already completed agreements with BHP Billiton, Kennecott Utah Copper, and NovaGold, etc,

Eagle Plains trades on the TSX Venture exchange under the symbol of EPL and is debt free. The market value is around £25 million and their stock closed at $0.53 CAD on Friday. We were investors before the Cooper Canyon spin off so we now own those shares too. We will continue to accumulate at this level over the summer and be in position for is shaping up to be a terrific seasonal acceleration in base and silver prices towards Christmas.

Silver Standard Resources Inc.


Robert Quartermain the President of Silver Standard Resources Incorporated has referred to his companies stock as a Call Option in the silver market, Is he right?

This was during an interview on ROBtv on 08 March 2006, so lets take a look.

Silver Standard controls the world's largest published in-ground silver resources of any publicly traded silver company, listing their reserves as over 508 million ounces of silver. Inferred resources total over 446 million ounces of silver. We are talking about one billion ounces plus here.

Geographically, their portfolio of properties covers Argentina, Mexico, Chile, Peru, the United States and Australia.
We are comfortable with their strategy of aggressively acquiring high quality silver projects with defined resources in preparation of higher silver prices. As a company it has been around for about sixty years surviving the last down turn that lasted twenty years or so and acquiring projects on very advantageous terms.

Silver Standard is well financed, has no long-term debt, no significant environmental liabilities and no hedging or derivatives program. As investors we have difficulty with silver mining stocks that are currently hedging their portfolio as we believe the upside potential of silver is enormous. This stock is certainly exposed to any movement in the silver price so we must be prepared for volatility with Silver Standards stock price. Whether we will experience the effect of a Call Option remains to be seen however, but we believe it will be an exciting run before this Bull Market in silver ends with a dramatic conclusion.

Silver Standards stock is traded on the NASDAQ as SSRI and on the TSX as SSO

This company had a Market Capitalisation of £1.0 billion and its shares have fallen from a recent high of around $24.0.

From the chart we can see that Silver Standard has bounced from its 200 day moving average at approximately $16.0 level. We are expecting some consolidation before moving higher but in twelve months time this stock will look like what it is – a bargain at $19.98.


Pan American Silver Corp


Pan American Silver Corporation has a very simply put mission statement: to be the best vehicle for equity investors wanting real exposure to higher silver prices.
This company also plans to become the largest primary silver producer in the world with annual silver production growing to 25 million ounces per year by 2009.

Pan American currently produces more than 12.5 million ounces of silver annually from 6 producing mines in 3 countries. It is constructing two additional mines, one in Mexico that will be operational by the end of 2006 and one in Argentina that is expected to commence production in early 2008. They have also managed to keep a lid on costs and can produce silver for less then of less than $3.50/ounce. If we assume that silver bullion will stay above the $10.0 level then Pan American’s stock should do very well indeed.

Another factor, which influences our decision to invest, is whether or not the company has good exposure to the price movement of silver. Pan American has never hedged any of its silver production and does not intend to hedge any of its silver production in the future, which makes it an ideal investment for us. We are precious metals investors seeking generous stock price growth and as such are prepared to take a calculated risk with the view to reaping excellent rewards. Geographically this company operates in Peru, Mexico and Bolivia. The fashionable South American swing to socialism and possibly the nationalisation of some of its industries is a risk that needs to be constantly monitored.

Pan American stocks are traded on the NASDAQ under the symbol of PAAS and on the TSX in Toronto under the symbol of PAA. They are the only silver company to trade on the Philadelphia Gold and Silver Index, known as the XAU and form part of the S&P/TSX Composite Index. If you consider yourself to be a hyper-investor you could try your luck trading Pan American on the Chicago Board Options Exchange. This we may cover later but options’ trading requires strict discipline and balls of steel, unless you enjoy sleepless nights.
Look out for Pan American Silver’s Q2 results on o2 August 2006 after market close, they should make exciting reading.

From the chart we can see that the stock has bounced from the $16.0 level and is now approaching the 200-day moving average. Some of you may prefer to wait until the stock has consolidated above this average, which is fine. However, we are adding to our holdings at this level.


16 July 2006

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.


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.

Silver Wheaton


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.


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

08 July 2006

Coeur d’Alene Mines Corp


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.


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

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.


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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