“Mining shares are getting a very strong bid in today’s session taking the HUI up sharply through the 600 level, a psychological resistance level. As you can see on the chart, the index is moving ever closer to the top of the recent chart gap created last month when the shares were sold off during a downdraft in both the gold and silver bullion markets. I would expect the perma bears in the shares to try to make an effort to hold the index BELOW this resistance level. If they fail, I believe there will be enough momentum in the sector to mount a move back to the recent all-time high.
“There have only been two times in the past ten years when, from our own calculations, gold and silver equities were attractively priced relative to the metal, that being 2001 and 2008. We are back strongly in that territory.
I believe if current gold and silver prices hold up, and I believe they are actually going to increase, that we are going to see a rather dramatic jump higher in the prices of select gold and silver equities on a go-forward basis.
There are a variety of ways to play that. I would put together a list of senior producers that have organic growth in terms of production baked into the cake for the next three to five year time frame, growing production at better than average production cost per ounce.
The second thing to do is to make a list of junior producers that would be accretive for senior mining companies to purchase.
via My Blog
Nov 01, 2011 (SmarTrend(R) News Watch via COMTEX) — Below are the top five companies in the Precious Metals & Minerals industry as measured by relative performance. This analysis was compiled based on yesterday’s trading activity as we search for stocks that have the potential to outperform.
Silver Standard Resources (SSRI) ranks first with a loss of 2.25%; Silver Wheaton (SLW) ranks second with a loss of 3.81%; and Hecla Mining (HL) ranks third with a loss of 3.98%.
Coeur d’Alene Mines (CDE) follows with a loss of 4.27% and Endeavour Silver (EXK) rounds out the top five with a loss of 4.32%
We are in stage one of the mining company shares. Over the past couple of weeks, as the precious metals came back to retest support, the mining shares have come back to retest support as well. The second stage of the mining shares bull market is, I think, about ready to begin. We can expect much higher prices in the months immediately ahead for all the gold mining and silver mining shares.
The average silver price (per ounce) realized by Silver Wheaton from its streaming contract with Capstone Mining Corp. rose from $16.20 in 2009 to $32.30 currently.
We expect the average price to keep rising given the growing industrial demand for silver as well as on fears of inflation. Silver Wheaton mainly competes with silver manufacturers like Silver Standard Resources , Pan American Silver, Bear Creek Mining Corporation and Endeavor Silver . We currently have a Trefis price estimate of $43.14 for Silver Wheaton’s stock, about 25% above the current market price.
Excellent quality insights on analyzing the miners. Also, he and Alexiscom1 have recently started a Newsletter. Best of luck, guys.
Although I believe the dislocation opened up enticing investment opportunities for silver, Hecla Mining presents one of the more glaring examples. On Monday, the company reported first-quarter earnings of $43.2 million — an improvement of 98% over the prior-year mark — and operating cash flow of $60.9 million. Hecla continues to post some of the lowest-cost silver production in the industry, and it incurred just $1.03 in cash costs for each of the 2.5 million ounces mined in the quarter. At an average realized sales price of $36.49 per ounce — itself a remarkable 15% outperformance of the average spot price — Heclas low cost structure is padding its balance sheet with ample cash as if in response to the companys needs. After a fresh injection of $38 million, Heclas cash hoard now stands at $321.7 million.In closing, I hasten to point out that Heclas 142 million ounces of silver in reserves carry a present market value of $5.3 billion, without any consideration of Heclas 757,000 ounces of gold reserves. At an enterprise value beneath $2 billion, Hecla trades at about 38% of its silver-reserve value. I have argued that Silver Wheatons shares are undervalued on a similar basis, and yet Heclas cost structure retains a solid advantage over even that fixed-cost silver sensation.
VANCOUVER (Commodity Online): Revenues of Silver Wheaton Corp.(TSX:SLW) (NYSE:SLW) increased 84% to a record $158.2 million, announced the company press release on unaudited results for the first quarter ended March 31, 2011.
This is when compared with $85.9 million in Q1 2010.
Net earnings increased 142% to a record $122.2 million ($0.35 per share), compared with $50.6 million ($0.15 per share) in Q1 2010.
Operating cash flows increased 121% to a record $127.2 million ($0.36 per share1) compared with $57.6 million ($0.17 per share1) in Q1 2010.
Also for the period, Silver Wheaton recorded attributable silver equivalent production of 6.2 million ounces (6.1 million ounces of silver and 2,900 ounces of gold), representing an increase of 10% over the comparable period in 2010.
The company registered silver equivalent sales of 4.9 million ounces (4.8 million ounces of silver and 2,500 ounces of gold).
With another 22.5% climb in silver prices recorded during the first quarter of 2011, quality silver miners are poised to enjoy still more of that epic margin expansion that has fueled the sector’s truly epic outperformance of the market. Although Silver Wheaton (NYSE: SLW ) already approached the pinnacle of corporate profitability in the fourth quarter of 2010 — with an astonishing 82% net profit margin — the company’s unique, fixed-cost business model could yield a further 25% sequential expansion of its cash operating margin for the first quarter of 2011.
Fellow growth machine Endeavour Silver (NYSE: EXK ) posted operating results for the first quarter this week, and reported a gorgeous average realized silver price of $33.18 for the period.
Last week though it came to our attention there is a new stock in the sector and even their name sends investors in the wrong direction and which is why we missed it to begin with, U.S. Gold (UXG). U.S. Gold is an exploration company whose primary mission was gold but they have come across a very nice potential five million ounce per year silver mine that could be operational by 2014 in Mexico.
At thesilvershortage.com we have been riding the bull market in silver and silver mining stocks for almost four months now. During that time it has become more difficult to find value in the sector. Many of the stocks like Endeavor Silver (EXK) and First Majestic Silver (AG) have shot up to where they trade at 6-8 times revenues. They also trade at above average market P.E. multiples which is ironic because just as late as two weeks ago you could buy the best at 13-15 times earnings or just an average market multiple.
Last week we concentrated our positions in relative value Coeur d’Alene mines and over weighted Pan American Silver which was the last true value in the silver sector. Pan American had an analyst day Friday and was up 8% plus so we took profits on half of our position and are holding the rest. The silver sector is so red hot right now we’re only 50% invested. We’re up 55% Y.T.D now so we are looking to book and protect our hard earned profits, more than betting big for more.
Last week though it came to our attention there is a new stock in the sector and even their name sends investors in the wrong direction and which is why we missed it to begin with, U.S. Gold (UXG). U.S. Gold is an exploration company whose primary mission was gold but they have come across a very nice potential five million ounce per year silver mine that could be operational by 2014 in Mexico. While we’re bullish on gold and that is still their long-term focus, this potential silver mine that could gross $200 million per year in three years make the valuation more justified. If they make their 2014 production target with gold at their other projects too, they could gross $350 million. They have a $1.369 billion market cap with $110 million in cash, so their enterprise value is 1.26 billion. So they trade at between 3-4 potential times future 2014 production. This is the first and only exploration stage company we’re buying at thesilvershortage.com.
There are some things behind these basic facts that make it more attractive. Of the $110 million in cash, they have $10 million in gold bullion and $25 million in silver bullion. They want that to equal half and half cash and bullion soon. That’s better than US companies leaving it earning .25% and losing value to inflation. The CEO of US Gold Rob McEwen takes no salary and owns 20% of the stock putting $53 million of his own money in, so his interest are 100% your interest as a shareholder. He has a tremendous record building shareholder value at Goldcorp Inc. (GG) where he took a $50 million company to an $8 billion market cap company. The CEO is a big believer in excess money printing leading to currency debasement which will lead to an eventual bubble in precious metals. However he feels that is at least until 2014 until we reach that level. The CEO’s goal is to get this stock included in the S+P 500 in the next three years which is very ambitious.
Here is the reason we like this stock. We think that the stock can get to $12 in the next three to six months which would be a potential 25% gain. All they have to do is stay on track with their new projects and let the rising price of silver and gold take their market cap higher. With $58 million of the CEO’s own money invested, he has about as much incentive possible to get it right and avoid any missteps. So even though this is a speculative exploration type company that doesn’t even have silver in its name, we will add another 5% to our 10% position to make it a 15% position after the open Monday.
We continue to think you remain cautious chasing the silver miners here. There valuations are now stretched so much it is hard to justify them by any fundamental basis except Couer d’Alene, Pan American Silver and exploration company U.S. Gold is for speculative money only and 15% of the money you allocate to silver is the maximum we will ever be in or consider for that position and we’re aggressive traders. This is a longer-term story than our other picks so don’t tie up that much capital in the name.
Mark Thomas at thesilvershortage.com
Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool’s free investing community, silver miner Hecla Mining (NYSE: HL ) has earned a respected four-star ranking.
Enjoy It While It Lasts, Because It Never Does!
In the movie Wall Street, an older street veteran told Charlie Sheen: Enjoy it while it lasts kid, because it never does”. We at thesilvershortage.com kind of feel that way right now. Silver new highs, silver mining stocks making new highs, been an average of 90% invested for over three months riding the momentum and the price gains. We said Sunday night that we would be more comfortable at about 60/40 invested because we’re more in a capital preservation mode. That is because the first quarter was one of our best lifetime quarters performance. We still want to build on that and make you more money. However at the same time we are going to take some profits tomorrow and go to cash some. The mining stocks valuations are getting really stretched now and they seem to go up every day. That can last for a while but for some insurance we’re booking more profits.
After a great first quarter the second stared off even hotter. In last two trading days the model portfolio soared 6% and that is why we are booking some profits from the newer investors coming into the sector. We’re on the open tomorrow are going to be selling 11% of 26% position in First Majestic Silver for a gain of approximately 18.01%. Glad we suggested that one again as our largest holding with a staggering 18% gain in less than a week. We’re selling are entire 10% position in Endeavor Silver (EXK) for a very nice approximate gain of 9.35%. We’re selling a 5% position in Pan American Silver (PAAS) for an approximate 3.22% gain.
These moves on the open will take us from 100% invested to only 73% invested then being 27% in cash on the sidelines. We have a new pick coming in next few days so stay tuned!