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.

Leverage the Precious Metals Bull!

Leverage the Precious Metals Bull!




By: Marco G.



September 23, 2010



http://goombarhsedge.blogspot.com/




Introduction

Today is Fall, the first day, and so it is befitting for us to look back and examine what has been happening to the precious metals markets. If you are a watcher of the markets, maybe you might be aware, that there seems to be a rise in the price of Gold recently.



Invisible reader: Well, how much has the precious metal risen recently?



Let us go to the charts and you may be a bit surprised.



Gold’s Rise

Of course, you are a student of the markets, and you are aware of Gold’s rise in price.



Invisible reader: Yes it is only a flash in the pan. The rise is insignificant, and Gold is volatile, and it will drop back soon.



Well, my rationale for the strength and duration of what is happening to the precious metals markets will have to wait for another day. The topic today is Gold’s rise, and how to leverage upon the trend. Following we chart the price of the largest Gold ETF – GLD, for the last three months. We are using the GLD as a proxy for the actual gold price.

Figure 1: GLD - Gold ETF in Summer 2010



It does not take very much astuteness to see that there seems to be a trend in place. The author has made it easier for the reader by placing a golden arrow following the GLD price upwards. This is an interesting chart. How much has the price of GLD gained in the last while? To keep things on a straight basis, we do some simple arithmetic starting with July 28th, the day of the first movement upwards for GLD and using today’s price we find that Gold’s rise amounts to about 12% (the figures are rounded and not exact).



Big Cap Gold

Invisible reader: All right then, how has the price movement of Gold, the metal, translated into the market valuation of the Gold miners.



Forget the large cap HUI, and let us take a look at GDX, the ETF that contains 30 odd large Gold miners. Following is the chart for the GDX this summer.

Figure 2: GDX - larger Gold miners performance in Summer 2010



Invisible reader: H..m..m, that yellow arrow upwards is interesting. What is the percentage movement upwards?



Using the same starting date, the movement upwards for this collection of miners is 20%. Wow, that is pretty good, so the miners are leveraged to the Gold price and magnifying the Gold price move by another two thirds times or 166%. Yes, this is a prime example of the leverage of mining equities to the underlying Gold price.



Junior Golds

Invisible reader: What about the smaller gold miners? Are they moving more, or less, or not moving at all?



We use the GDXJ ETF, the collection of about 60 smaller miners (mostly under $1Billion market capitalization) for this analysis and the chart is below.





Figure 3: GDXJ - Junior gold miners in Summer 2010.



Not surprisingly, or is it surprising to you? The smaller gold miners are also moving upwards and at a fast clip apparently. The price movement is up by 33% for this collection of Junior Gold miners. Wow, the Juniors are taking Gold’s price movement and adding another 21% move or taking the Gold’s move of 12% and multiplying by 275%!



The Lunar Metal’s Rise

Invisible reader: I wonder how the price of Silver is doing relative to Gold?



The author has penned a previous article pointing out that Silver may move more than Gold here. We use the large Silver ETF, SLV as a proxy for the Silver metals prices and the chart if below.

Figure 4: SLV - Silver metals ETF in Summer 2010.



Interestingly, looking at the above Silver chart, Silver seems to be a laggard and did not move upwards until the end of August, almost one month behind the movements of Gold. Well, to keep the comparison valid, we use the same starting date, July 28th and we will see what happens. Astonishment, the calculations show that Silver has moved 18% in price even when starting one month late!



Invisible reader: Wow! This is 50% more than Gold's move of 12%!









The Crème de la Crème of Silver Equities



Invisible reader: I can’t wait to see the results then for the Silver miners.



Unfortunately, there are no Silver miners ETF, that I am aware of. So, we use my favorite indicator of the health of the Silver market, the crème de la crème of Silver stocks, Silver Wheaton (SLW), the Silver royalty company to chart the gains made this Summer. The Silver Wheaton chart follows:

Figure 5: Silver Wheaton - SLW, large cap Silver Royalty company.



Surprisingly or not surprisingly, Silver Wheaton has turned in a gain of 47% from our calculations.



Invisible reader: Is something wrong here? SLW is a large cap and large cap miners are not supposed to leverage that much. They moved 47% while Silver only moved 18% in prices?





A Discarded Junior Silver



How about the smaller silver producers?



Genco Resources (GGCRF, TSX:GGC) was a previous silver producer, that had run into difficulties and management was trying to turn it around. In the chart following you can see the collapsing share price and then something happened this Summer to Genco.





Figure 6: Genco Resources (GGCRF, TSX:GGC) Silver Junior



On Sep 20th, Genco Resources received a merger offer from Silvermex Resources (SLVSF, TSXF:SMR) causing the share price to move by over 30%. Obviously, someone saw value in Genco. Silvermex is noted for having executives from Hecla (HL) and Silver Standard Resources (SSRI) (large Silver miners) in their management.



Using the same starting date of July 28th, the movement upwards for Genco was 59%.



Invisible reader: Well, you are being unfair again, that includes the takeover offer that juiced the price up!



The Hunt Brothers Forgotten Mine

Let’s take a look at another forgotten Silver security.



Canadian Zinc (CZICF, TSX:CZN) has the advantages of almost complete mining infrastructure and extremely high value ore for a pre-producer. A recent interview with CZN’s Chief Operating Officer is here.



This Summer’s performance of Canadian Zinc is displayed following.

Figure 7: Canadian Zinc (CZICF, TSX:CZN) Silver, Zinc, Lead mine in northern Canada



The price movement upwards for Canadian Zinc calculates to be 72% as of this writing.



Invisible reader: Sputter….Sputter……..but………but this can’t be happening! This is not making sense at all!



A Small Silver Producer

Finally, we look at a smaller Silver miner, based in the famous Silver Valley of Idaho. The chart for US Silver Corp (USSIF, TSXF:USA) is following.





Figure 8: US Silver Corp., (USSIF, TSX:USA) Silver producer in Silver Valley Idaho.



US Silver Corp is completing a $6Million private placement to refurbish a shaft to increase production abilities. The calculated price movement for US Silver this summer works out to be 102%.



Invisible reader: Now, this does it! The writer is obviously rigging the figures!



Leverage of Silver Juniors

The heading of this summary says it all. Silver is moving more than Gold in this run of the precious metals bull market. Miners leverage the underlying metals price. Juniors are leveraging the metals prices more. Good juniors will move quite spectacularly.



Invisible reader: This is all unfair! You are only choosing specific examples to skew the mathematical analysis and comparison!



Exactly, no further comment.




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