6 Silver Stocks Ready to Follow SLV's Momentum

The author is an avid silver investor, and is watching the silver price this week with an eagle eye. Is it now time for the "good guys" to win for a change?

CFTC Silver Revelations

Last week we had Silver shocking news from the Commodities Futures Trading Commission (CFTC) that silver futures pricing may have been manipulated:

I do believe that there have been repeated attempts to influence prices in the silver markets,” Mr Chilton said on Tuesday at a meeting in Washington. “There have been fraudulent efforts to persuade and what I consider deviously control that price.

With this news and revelations being priced into the markets, Silver appears poised for a new movement upwards. The author reviews the silver price and the status of his Six Silver Stocks recommendation made on September 17th, 2010.

Silver Price Movement Recently

The Kitco chart following displays the last Silver price at the end of the day Friday October 29th as $24.75 USD.
Click to enlarge:

Figure 1: Silver Daily closes at $24.75 Oct. 29th, 2010.
Examining the silver movement using the SLV Silver ETF as a proxy for the price of silver for the last month in the chart following we see the distinct formation of a bowl or cup shape, circled in blue.
Click to enlarge:

Figure 2: Silver Chart with Bowl formation. Silver appears poised for break upwards.
In technical trading circles, the bowl or cup shape is seen as bullish, as a continuation of an up trend indicator. Looking further back to summer, in the following chart of the SLV, we see that the silver price started the up trend on or about August 22nd, 2010.
Click to enlarge:
Figure 3: Silver moves since August 23rd, 2010. All indicators shown are bullish. The RSI is turning upwards. The price bowl looks poised for a break upwards. The volume is increasing, supporting the price moves. The MACD and STO are curling upwards.
Since that date, the price action has been straight upwards until mid October. On about October 15th, the upwards movement stopped and the prices traced out the afore mentioned bowl shape. With the CFTC news last week, it now looks as if the Silver price may have finished tracing the bowl and may be ready to resume its upwards movement in November.

Six Silver Stocks Status

Following are the charts of the stock prices since August 23rd, 2010, for my six Silver stocks recommendation and comments. Each chart is compared to the price action of the SLV ETF, the silver white tracing.
Silver Wheaton - SLW (Click to enlarge)

Figure 4: Silver Wheaton - SLW is tracking Silver's price.
Silver Wheaton just seems to be moving along the track in line with the price of silver. SLW did give a bullish pop of 5% this past Friday. SLW reported record earnings of $53 million USD, in August, 2010, up 200%. It will be interesting to see what this November's quarterly report will bring, with the peaking Silver prices.

Hecla Mining - HL (Click to enlarge)

Figure 5: Hecla Mining - HL is tracking Silver's price.
Hecla's share price jumped over Silver in early September, 2010 and has stayed up since. HL reported its third quarter last week with an increase of 30% in cash flow versus 2009.
Silver Standard Resources - SSRI (Click to enlarge)

Figure 6: Silver Standard Resources - SSRI is tracking Silver's price.
Silver Standard Resources' share price jumped over Silver in mid-October and has stayed buoyant since then. Last Friday, SSRI announced the sale of its huge Snowfield and Bruce Jack properties. SSRI will still control about 50% of the value of these properties in the new company, Pretium Resources, formed by their former CEO Robert Quartermain. Perhaps this is a mechanism that will be able to unlock the precious metals values in the two large properties.
US Silver Corporation - USSIF.PK (Click to enlarge)

Figure 7: US Silver Corp USSIF is leveraging Silver's price.
US Silver Corporation displays the characteristics of a junior miner's ability to leverage the price of silver. USSIF has stayed consistently above the silver price line and the gap higher is increasing. USSIF has just completed a $7 million dollar financing to refurbish a shaft in their Coeur mine, in order to increase production. USSIF reported its 3rd quarter in mid-October, and production missed targets due to a contractor fatality in June, 2010.
Genco Resouces - GGCRF.PK (Click to enlarge)

Figure 8: Genco Resources - GGCRF is leveraging Silver's price.
Genco Resources is an undervalued Silver producer in Mexico, that was just offered a merger by Silvermex Resources (SLVXF.PK). Last Friday, ISS Proxy Services recommended the merger going forward, causing the movement in the share prices.
Canadian Zinc - CZICF.PK (Click to enlarge)

Figure 9: Canadian Zinc - CZICF is leveraging Silver's price.
Canadian Zinc made a large movement upwards in mid-September with its deep resource extension drilling. CZICF is the owner of the old Hunt Brothers' Silver, Zinc and Lead Prairie Creek mine in northern Canada. CZICF is drilling to prove up further resources and is awaiting approval of its water permit, expected in 2011. CZICF just reported last week on its Environmental Assessment and drilling being finished for the season.

Silver Summary

Silver appears poised to resume moving upwards this fall. The fundamental reasons for Silver to become more valuable was just given a boost by the CFTC revelations. Major Silver miners such as SLW, HL, and SSRI are moving in time with Silver in addition to their own value creation. Smaller Junior Silver stocks such as USSIF, GGCRF and CZICF are leveraging the price of Silver with their movements upwards. The Silver status is definitely satisfactory.
Disclosure: The author is long Silver mining equities.
Important Disclaimer: The information and opinions contained within this document reflect the personal views of the author and should be viewed as food for thought and amusement only. The author may from time to time have a position in any of the securities mentioned. There are no guarantees of the accuracy, reliability or completeness of the information contained herein. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. These writings are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not request or receive compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.

Six Silver Stocks Status - with CFTC Revelations

Six Silver Stocks Status - with CFTC Revelations.

October 31, 2010

By:  Marco G. http://goombarhsedge.blogspot.com/

The author is an avid Silver investor, and is watching the Silver price this weekend with an eagle eye.   It is interesting  in that this next November week starts with "All Hallows Day" and "All Souls Day" upcoming.  Is it now time for the "good guys" to win for a change?

CFTC Silver Revelations

Last week we had Silver shocking news from the Commodities Futures Trading Commission (CFTC) that Silver futures pricing may have been manipulated:

“I do believe that there have been repeated attempts to influence prices in the silver markets,” Mr Chilton said on Tuesday at a meeting in Washington. “There have been fraudulent efforts to persuade and what I consider deviously control that price.”

With this news and revelations being priced into the markets, Silver appears poised for a new movement upwards.  The author reviews the silver price and the status of his Six Silver Stocks recommendation made on September 17th, 2010.

Silver Price Movement Recently

The Kitco chart following displays the last Silver price at the end of the day Friday October 29th as $24.75 USD.

Figure 1:  Silver Daily closes at $24.75 Oct. 29th, 2010.

Examining the Silver movement using the SLV Silver ETF as a proxy for the Silver price for the last month in the chart following we see the distinct formation of a bowl or cup shape, circled in blue.

Figure 2:  Silver Chart with Bowl formation.  Silver appears poised for break upwards.

In technical trading circles, the bowl or cup shape is seen as bullish, as a continuation of an up trend indicator.  Looking further back to summer, in the following chart of the SLV, we see that the Silver price started the up trend on or about August 22nd, 2010. 

Figure 3:  Silver moves since August 23rd, 2010.  All indicators shown are bullish.  The RSI is turning upwards.  The price bowl looks poised for a break upwards.  The volume is increasing, supporting the price moves.  The MACD and STO are curling upwards.

Since that date, the price action has been straight upwards until mid October.  On about October 15th, the upwards movement stopped and the prices traced out the afore mentioned bowl shape. 

With the CFTC news last week, it now looks as if the Silver price may have finished tracing the bowl and may be ready to resume its upwards movement in November.

Six Silver Stocks Status

Following are the charts of the stock prices since August 23rd, 2010, for my six Silver stocks recommendation and comments.  Each chart is compared to the price action of the SLV ETF, the silver white tracing.

Silver Wheaton - SLW

Figure 4:  Silver Wheaton - SLW is tracking Silver's price.

Silver Wheaton just seems to be moving along the track in line with the price of Silver.  SLW did give a bullish pop of 5% this past Friday.  SLW reported record earnings of $53 million USD, in August, 2010, up 200%.  It will be interesting to see what this November's quarterly report will bring, with the peaking Silver prices.

Hecla Mining - HL

Figure 5:  Hecla Mining -  HL is tracking Silver's price.

Hecla's share price jumped over Silver in early September, 2010 and has stayed up since.  HL reported their 3rd quarter last week with an increase of 30% in cash flow versus 2009.

Silver Standard Resources - SSRI

Figure 6:  Silver Standard Resources - SSRI is tracking Silver's price.

Silver Standard Resources' share price jumped over Silver in mid-October and has stayed buoyant since then.  On Friday last, SSRI announced the sale of their huge Snowfield and Bruce Jack properties.  SSRI will still control about 50% of the value of these properties in the new company, Pretium Resources, formed by their former CEO Robert Quartermain.  Perhaps this is a mechanism, that will be able to unlock the precious metals values in the two large properties.

US Silver Corporation - USSIF

Figure 7:  US Silver Corp USSIF is leveraging Silver's price.

US Silver Corporation displays the characteristics of a junior miner's ability to leverage the price of Silver.  USSIF has stayed consistently above the Silver price line and the gap higher is increasing.  USSIF has just completed a $7 million dollar financing to refurbish a shaft in their Coeur mine, in order to increase production.  USSIF reported their 3rd quarter in mid-October, and production missed target due to a contractor fatality in June, 2010.

Genco Resouces - GGCRF

Figure 8:  Genco Resources - GGCRF is leveraging Silver's price.

Genco Resources is an undervalued Silver producer in Mexico, that was just offered a merger by Silvermex Resources.  On Friday last, ISS Proxy Services recommended the merger going forward, causing the movement in the share prices.

Canadian Zinc - CZICF

Figure 9:  Canadian Zinc - CZICF is leveraging Silver's price.

Canadian Zinc made a large movement upwards in mid-September with their deep resource extension drilling.  CZICF is the owner of the old Hunt Brothers' Silver, Zinc and Lead Prairie Creek mine in northern Canada.  CZICF is drilling to prove up further resources and is awaiting approval of their water permit, expected in 2011.  CZICF just reported last week on their Environmental Assessment and drilling being finished for the season.

Silver Summary

Silver appears poised to resume moving upwards this fall.  The fundamental reasons for Silver to become more valuable was just given a boost by the CFTC revelations.  Major Silver miners such as SLW, HL, and SSRI are moving in time with Silver in addition to their own value creation.  Smaller Junior Silver stocks such as USSIF, GGCRF and CZICF are leveraging the price of Silver with their movements upwards.  The Silver status is definitely satisfactory.

Disclosure: The author is long Silver mining equities.
Important Disclaimer

The information and opinions contained within this document reflect the personal views of the author and should be viewed as food for thought and amusement only. The author may from time to time have a position in any of the securities mentioned. There are no guarantees of the accuracy, reliability or completeness of the information contained herein. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. These writings are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not request or receive compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.

Silver Stealth in Gold Bull Market

Silver’s Stealth in Gold Bull


By: Marco G.

September 30th , 2010

http://goombarhsedge.blogspot.com/


I’ll bet that you the reader thought that the Gold Bull was strong in September, didn’t you? Yes, Gold was strong gaining in price by 5% over the month and hitting a high of $1315 USD on September 30th before closing at $1308 for the end of the month. Well, would it surprise you to know that Silver made the stronger moves in September gaining 12.4% for the month and hitting a high of over $22.08 USD before closing at $21.78 for the end of the month.

Silver Stealth Bull

Silver is following the higher priced Gold in the Bull market for precious metals this fall. In the Google Trends chart following, the search term “Gold Price” turns out to be four times as popular as the search term “Silver Price”.

 
So, Silver is gaining more on a percentage basis, but in terms of popular awareness the Bull market for Silver is still operating in “Stealth” mode.

Silver versus Gold Gains for September

Continuing in my mode as a Silver enthusiast, the author decided to run some statistics on Silver stock gains for the month in comparison to Gold. Note that the author definitely said gains and did not use the word moves, so sure he is that there were gains across the board. In the chart following the author displays the surprising findings.

Using the GLD ETF as a proxy for the Gold price, the gain for Gold was 5.1% for the month from September 1st end of day to September 30th end of day prices. The source of the prices were from Yahoo Finance. The surprising thing is that the SLV ETF as a proxy for the Silver price gained more than twice as much as Gold coming in at a 12.4% gain. The usual explanations for the Silver strengths are two fold. Firstly, Silver being also an industrial metal as well as a precious metal collapsed more severely than Gold did during the 2008 economic crisis. Since then, Silver is only presently recovering to the highs reached since before the crisis. Therefore, Silver had a longer way to catch up percentage wise. The second reason, is that Silver is a much smaller market than for Gold and is therefore more volatile.

Gold Miners

The large Gold miners ETF, the GDX gained 5.8% for the month relative to the metal’s price gain of 5.1%. This would seem as if there was almost no leverage for owning the equities as opposed to owning just the metal. The author suspects that the market for large Gold mining equities may be saturated for lack of a better word. The Gold producers’ costs are higher due to the inflating energy and production costs plus the market just does not appreciate the large cap miners’ stories as much anymore. This is a trend that investors had better keep an eye upon. Large cap miners are just not providing any leverage to Gold presently.

Just for fun, the author decided to checked out the gain for the high quality stock Gold Corp (GG, TSX:G). Gold Corp’s gain for the month was a paltry .003%. Amazing! What is the story here? Well, if the reader recalls, Gold Corp is purchasing Andean Resources (ANDPF, TSX:AND) for $3.4 billion USD. The author expressed an opinion here that Gold Corp was paying too much. It appears that the market may agree with the author and is penalizing Gold Corp for this.

The smaller Gold miners in the GDXJ ETF gained a respectable 9% for the month. Juniors are providing a leverage of almost 80% more than gains made by the underlying Gold price. This is a trend that investors should be watching, as the author believes the market monies are presently moving to the smaller names in mining.

Silver Miners

Silver is where the big gains story is this month, with the shining metal sporting a 12.4% hike. The author is using the Silver ETF SLV as a proxy for the Silver price in the chart following.

The Silver miners are gaining even more by leveraging the Silver price. Under cover of the Gold bull market, the Silver producers as a group are enjoying their own “Stealth” Bull with double digit gains.



Silver Miners ETF SIL gains 15.1%.
 
SIL gained 15.1% and that is still a respectable leverage to Silver as the ETF is a mixed bag of large cap and junior Silver miners. The following four large Silver producers comprise over 50% of this fund: Silver Wheaton (SLW), Fresnillo PLC (FNLPF), Pan American Silver (PAAS), Industrias Penoles (IPOAF). The author reviewed the SIL ETF in a previous article here?


Silver Wheaton (SLW) gains 18.4%
 
Silver Wheaton (SLW), the author’s “crème de la crème” Silver royalty stock turned in a marvelous performance this month with a gain of 18.4%. Silver Wheaton buys into the operating mines production streams of the Silver metals. They supply needed capital early in the infrastructure build in return for a portion of the Silver production in following years. Silver Wheaton only has twenty plus employees and are highly leveraged to the rising Silver metals price. Here is the link to Silver Wheaton’s presentation at the 2010 Denver Gold Forum, last week.

Hecla Mining (HL) gained 10.9%.
 
Hecla is a mid-sized Americas based Silver miner with operations in the Silver Valley of Idaho and their large Greens Creek mine in Alaska. Hecla has turned around their debt issues in previous years and has bought complete ownership of Greens Creek. Hecla has two projects of San Juan in Colorado and San Sebastion in Mexico. Here is a link to Hecla’s presentation at the 2010 Denver Gold Forum of September 21st.

Silver Standard Resources (SSRI) gained 14%.
 
Silver Standard Resources is a mid-sized Silver miner with large development projects in Silver. Their Pirquitas mine in Argentina has just starting production early this year. Silver Standard has a long pipeline of projects including the huge Snowfield and Brucejack properties in northern British Columbia. Here is a link to their presentation at the Denver Gold Forum of September 21, 2010.

Again, the larger cap miners are displaying rather poor leverage to the underlying Silver price. The market is just not paying a higher leverage for large Silver miners with the exception of Silver Wheaton. The author suspects that possibly, some of the capital that would have been invested in these miners has shifted instead to the smaller cap junior miners.

Junior Silver Miners

Now this is where the real surprising story is, in the small junior Silver equities. The author’s selection of three Silver stocks has each turned in 30% to 50% gains for the month.

USA Silver Corp (USSIF, TSX:USA) gains 32.1%
US Silver Corp is a small Idaho Silver Valley based miner. The author has a previous article detailing their production and prospects here. There is much speculation about consolidation of the smaller miners in the rich Silver Valley and US Silver is one of the takeover candidates. The possible suitors include Hecla Mining (HL) and Coeur d’Alene Mines (CDE), both of whom have operations in the Silver Valley. US Silver has just completed a recent $6 Million financing with the aims of refurbishing a shaft and increasing Silver production.

Canadian Zinc (CZICF, TSX:CZN) gains 53.3%
 
Canadian Zinc is the Northern Canada Silver, Lead, Zinc mine built by the old Texas Hunt Brothers during the last Bull cycle of Silver in the early 1980’s. The Silver price crashed and the mine was abandoned when almost completed. Recently, Canadian Zinc has increased the resources by multiples and is at the stage of environmental permitting for water usage. Presently there is a deep drill program assessing the extent of the deeper stratas of the rich ore. A recent interview with Alan Taylor the COO and VP Exploration is posted here.

Genco Resources (GGCRF, TSX:GGC) gains 41.9%
 
Genco is a Mexican Silver miner turnaround story. This was previously a $4 stock, when a few years ago, it was mining Silver profitably. Because of politics and other issues, the stock has declined to where it is today. Recently with management changes, a new NI 43-101 compliant technical report and feasibility study completed the company’s fortunes are improving. On September 20, 2010, Silvermex Resources (SLVXF, TSX:SMR) offered a merger for Genco driving the depressed price up 30%. The author conducted an exclusive interview with the Chairman and CEO, James Anderson yesterday, discussing the merger and it is posted here.

Summary

The Gold Bull market for September was strong turning in a 5.1% gain for the month. Under the cover of the more visible Gold Bull market, the Silver metal gained 12.4% and Silver equities are turning in even larger and more surprising double digit gains. A select group of the smaller and more volatile junior Silver miners are turning spectacular gains of up to 50%.

Investing in this sector of the markets is not for everyone. The reader needs to understand that the Silver market is much smaller than Gold, especially for the smaller equities, and are much more illiquid causing much higher swings up as well as down.



Disclosure: The author is long Silver mining equities.



Important Disclaimer



The information and opinions contained within this document reflect the personal views of the author and should be viewed as food for thought and amusement only. The author may from time to time have a position in any of the securities mentioned. There are no guarantees of the accuracy, reliability or completeness of the information contained herein. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. These writings are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not request or receive compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.

Silver Stock Status - Up

Silver Stocks Status - Up


The author is especially upbeat this morning, as his “Six Silver Stocks” article was selected the Editor’s Pick on the Seeking Alpha investment site for over the weekend. This resulted in the article being the second most popular article on that same site. This article was also posted on Stockhouse.com.  There was quite a few hundred reads on that also.  Now all this is gratifying, but what is the status of my Silver stocks that I hold and mentioned in that article?

Figure 1: SLV Silver ETF on morning Sep 20, 2010

Well a check of the Charts in early morning Monday, September 20th, 2010 reveals that Silver has moved modestly upwards. We are using the SLV ETF as a proxy for the Silver prices.

Figure 2: USA, US Silver Corp on the morning of Sep 20 2010. Note that the National Inflation Association has just issued a recommendation for USA on their website www.inflation.us.

The charts show an 18% movement upwards for USA. It seems that the National Inflation Association of the US has just issued a buy recommendation for US Silver Corp. Trading this morning was brisk with upwards of 3 million shares changed hands in the first two hours.


Figure 3: GGC, Genco Resources chart on the morning of Sep 20, 2010. Note that Genco has a trading halt for important news.

Genco Resources chart shows a 17% movement upwards, before a trading halt was issued by the regulator. This may be news coming of a new mining CEO found for this company.

Figure 4: CZN, Canadian Zinc chart for morning of Sep 20, 2010.

Canadian Zinc’s chart is showing a 19% movement upwards this morning.

Now, it is quite interesting that all three small Silver stocks mentioned in the “Six Silver Stocks” article made some movement, after the article was published. Coincidences’ always happen don’t they. Anyways, I am glad for the readers’ comments and emails.  I think I deserve a hot dog and coffee.

I wish all you readers Silver Success!

Marco G.


The author is long Canadian Zinc (CZN.to, CZICF), US Silver Corp (USA.v, USSIF), and Genco Resources (GGC, GGCRF)


Important Disclaimer

The information and opinions contained within this document reflect the personal views of the author and should be viewed as food for thought and amusement only. The author may from time to time have a position in any of the securities mentioned. There are no guarantees of the accuracy, reliability or completeness of the information contained herein. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. These writings are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not request or receive compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.

Six Silver Stocks

Six Silver Stocks

By: Marco G.

September 17, 2010

http://goombarhsedge.blogspot.com/

If you have viewed any of my previous writings, you will know that I am a fan of Silver mining stocks. Firstly, I specialize in mining stocks, and secondly is that in searching for the best gains, I believe we have an edge for the Silver metal in the upcoming fall as detailed here in the Silver break of the Gold Silver Ratio.

So, let us take a look at some shining Silver possibilities for your portfolio.

Silver Wheaton – SLW

Silver Wheaton, the large-cap $8.5 billion royalty silver equity, is in the author’s opinion, is “la crème de la crème” of Silver stocks. Their unique business model of purchasing Silver production streams allows them to shed the production risks and still participate in the exposure to the rise of the underlying Silver metal price. Looking at the above chart, you can see that Silver Wheaton has done well this year with an 80% move, and has roughly tripled in price since the lows of March 2009. Silver Wheaton is the large safe vehicle to participate in the Silver price rise. The author has owned SLW in the past, and uses the status of SLW as an indicator in monitoring the Silver sector.

Hecla Mining – HL

Hecla Mining is a mid-cap $1.5 billion Silver producer based in the Silver Valley area of Idaho. Hecla is stabilizing their Greens Creek mine production in Alaska which features negative cash costs due to the Zinc Lead by-products credit. Since tripling in price from the lows of March 2009, Hecla has struggled for the most of this year. However along with the other silver miners, Hecla has made a strong move forward with the rise of the Silver metal’s price. Hecla is a volatile equity that may have significant upside, should they iron out the kinks. The author has owned HL in the past.

Silver Standard Resources – SSRI (TSX:SSO)

Silver Standard Resources, SSRI, is an emerging $1.6 billion mid-cap Silver producer based in the Americas. SSRI has just started production at their Pirquitas mine in Argentina at the beginning of this year. What is notable about SSRI, is they own twin gold silver projects of Snowfield and Brucejack, that are huge projects in northern British Columbia, which are at the preliminary assessment stage. The author is considering an investment in SSRI for the possible large upsides in development.

US Silver Corp – USSIF (TSX:USA)


US Silver Corporation, is a small-cap $76 million Silver Valley, Idaho based miner. Their Silver property was acquired from Coeur D’Alene (CDE), and their reopening of the mines success is detailed in a previous article here. USA has roughly doubled in price this year. USA has just completed a small $6 million private placement to re-open the Coeur mine shaft which is linked to their mining complex and increase production. As the author is keen on small Silver mining stocks, the author owns shares of USA.

Genco Resources – GGCRF (TSX:GGC)

Genco Resources is a small-cap, $37 million, turnaround story of a Silver producer based in Mexico. Their La Guitarra mine has been restarted under changed management. Genco owns the whole Temascaltepec mining district, which has a long history of Silver production in Mexico. Genco has a Ni 43-101 compliant report indicating 50 million ounces of reserves and 150 million ounces of resources in Silver equivalents. As Genco was a $4 stock, when producing in previous years, this makes this almost a no-brainer investment for this author.

Canadian Zinc – CZICF (TSX:CZN)

Canadian Zinc is a small-cap, $61 million, story of the old Texas Hunt brothers Prairie Creek mine built in the 1980’s when Silver was last at $50 per ounce. The mine is in northern Canada and is unique for the extreme high values of its ore, $800USD per ton, and the complete mining infrastructure that was built in place, not used and then abandoned. See this September 15th, 2010, interview with Alan Taylor, their Chief Operating Officer and VP of Exploration.

Canadian Zinc is misnamed and misunderstood and much undervalued. The Prairie Creek mine was fully permitted and 3 months from production when Silver prices collapsed and they shut down. Defined resources have increased from 2 million tons in the Hunt brothers’ days to over 11 million tons presently, and there is potential of multiples of that in their present exploration. There is a deep drill program going presently that should report on mineralization 4 kilometers north of their mine site. Canadian Zinc is in the process of permitting for mining production. The potential for Canadian Zinc is large and the author owns shares in this company.



Six Silver Stocks Performance in 2010

The following chart compares the relative performance this year of the above six mentioned stocks.

To paraphrase the old adage, “Past performance does not indicate possible future returns”. Silver Wheaton, US Silver and Canadian Zinc are leading with their gains. Hecla, Silver Standard and Genco are still dealing with their issues. However, they all have moved off their lows of the Summer and are moving up with the Silver price increase.

Summary

The Silver metal price appears to be moving to new highs this fall. The author is a firm believer in junior mining equities for leveraging the gains of the underlying precious metals. The author also believes that the safer investments would include miners that are either mining or close to production. The reader is advised to assess their own appetite for risk and reward in their own investments.

Disclosure: The author is long Silver mining equities.

Important Disclaimer

The information and opinions contained within this document reflect the personal views of the author and should be viewed as food for thought and amusement only. The author may from time to time have a position in any of the securities mentioned. There are no guarantees of the accuracy, reliability or completeness of the information contained herein. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. These writings are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not request or receive compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.





Disclosure: Long mining equities

Tags: SLW, SSRI, HL, GGC, GGCRF, USA, USSIF, CZN, CZICF, Silver, Gold, SLV, GLD, GDXJ, GDX, GSR

Junior Miners in the Sweet Spot

Even as the uncertainties in the stock markets are very worrying, there is a segment in which the prospects are looking quite bright. Gold and Silver miners are setting up to make higher price moves together with the commodity prices rising this Fall according to Jeb Handwerger in his latest article. To take advantage of this possible precious metal price movement upwards, there is also a conceptual sweet spot in the development of a mining project that you should be aware of. A company that is situated in the sweet spot may be able to move more aggressively than is typical.


Mining’s Sweet Spot

The classic model of building a mine has a sweet spot in the development project pathway. This spot is sweet because of multiple factors; not only are there the possibilities of price gain ahead as the mine comes into production, but the risks are now also lower as some of the uncertainties along the development path with bringing a mine to fruition are overcome. See the chart below which depicts a model mine development from discovery to production.

Figure 1 - Classic Model of Production Startup - Note the ramping up to production brings share price appreciation. Source: www.caseyresearch.com/printArticle.php?id=63

The chart plot is of a typical mine along the path of discovery to actually building the mine. The early rise in price peaks with drill results is at point #1 and eventual confirmation of a mineable ore body is at point #3. Then there is fall back in price as shares are diluted for construction funding and there is disinterest during the construction wait time with a low at point #5. Then as the project nears completion, investors become interested again at point #7, moving the prices higher. Finding a miner that is within this sweet spot at the dip in prices around point #7 may help increase your possible returns.


Leveraging with Junior Miners

The typical large existing miner bringing a new project into production will just be adding to their production roll up. The new project will only add incrementally to the large miner’s revenue. The story is quite different for a small junior miner that has only one project that they are bringing into production. As the production is ramped up, somewhere along the line, the company will gradually turn the corner into profitability and shock the market with this good news. The story of a miner suddenly being newly profitable is good to juice up the percentage returns for this particular stock. This is what is meant by the leverage of a junior miner, the returns from the investment is riskier but may be more profitable than for an established miner.


Four Junior Mining Opportunities

To take advantage of the knowledge of the mining sweet spot and leveraging with the junior miners, I will present some viable mining projects that are just coming into production or are just coming back into production after a period of shut down.

Great Basin Gold

This is my favorite gold mining junior, that is just now coming into production with their nameplate mine, Great Basin Gold (GBG). I have written extensively about this miner here. Great Basin will have the first gold pour from their Burnstone mine in South Africa, this month of September. They just were hooked to the Eskom electrical grid on August 8th and have been progressively moving to produce their first gold results this quarter. See the stock chart following, where GBG has broken out of their trading range after their August 11th quarterly report and in anticipation of the Burnstone mine startup.

Figure 2: Great Basin Gold breaking out with Burnstone gold mine startup.

Genco Resources

Genco Resources [TSX:GGC] is a small Silver miner with a large property in Mexico, the whole of the known Temascaltepec mining district. This was purchased from an existing miner, Luismin S. A. de C. V, in 2003, and includes the Guittara Mine and a 340 ton per day process mill. This district has been mined since the 15th century. A summary fact sheet for Genco is located here.

Genco was a producing mine until shut down in 2008. They have restarted mining in May, earlier this year. A Feasibility Study that proposes a ten fold increase to 3000 tons per day and a Technical Report has been completed on their project. Their new CEO, Anderson is acting to implement the feasibility study and the share price has started to move up just this week as displayed in the chart following.

Figure 3: Genco Resources breaking out with the Silver price.

US Silver Corp

US Silver Corporation (TSXV:USA, USSIF OTC) is a relatively new Silver miner working on projects, the Coeur Mine, the Galena Mine and the Calanday Project, all purchased from Coeur d’Alene (CDE), the large cap Silver miner. The properties are in the heart of Silver Valley, Idaho. The Galena mine has ranked as the second largest silver producer mine in the United States. An earlier article by this author on US Silver is here.

The company has just turned in a profitable quarter and are looking to increase production this fall. See the following chart that show the stock price of US Silver breaking out following the path of the price of Silver.

Figure 4: US Silver Corporation breaking out with the Silver price.

Crowflight Minerals

Crowflight Minerals [TSX:CML] is in some ways similar and in some ways different than the previous three precious metals miners. Similar to the previous miners, Crowsflight is restarting mining operations in Manitoba, Canada. Being different, this is a Nickel miner that has been offered a buyout by Jinchuan Group of China, China’s second largest steel producer. The expiration date of the buy out was August 31st, 2010. Another way different is that under terms of the buy out offer, and with 700 million shares fully diluted, the $150 million dollar offer would mean a share price of about 22 cents. Interestingly, the share price of Crowflight Minerals is capped at 14 cents as displayed on the chart following.

Figure 5: Crowflight Minerals - Held at 14 cents.

It is unclear to the author, as to why the share price is stuck at 14 cents while the possible value is 22 cents for the buy out. Should the buy out materialize after August 31st, the stock price should break out as in the charts for the previous miners.

Summary

Investing in these mining stocks is not for everyone. You need to perform your own due diligence as to whether the risks and rewards in these investment ideas are acceptable for you.

This fall is shaping up to be a very exciting time for small junior miners that are just turning the corner into profitability by ramping up into production. Astute investors may find that they are just in the sweet spot for a Junior Miner.



Disclosure: Long junior miners