BL: "Two of my favorites, both producers and great growth stories, are Great Panther Resources ((TSX: GPR)) and Endeavour Silver Corp. (NYSE:EXK). They are taking historic Mexican projects that have been under-explored over centuries and bringing them into the modern world by applying current exploration and mining methods.
Another company I like is Silvercorp Metals Inc. (SVM); it's primarily a Chinese silver play, but is taking a run at Klondex Mines Ltd. (OTCQX:KLNDF) in the U.S. I don't know whether they will be successful, but it's an example of how this very talented management team is looking to expand its base. It's a cash-rich company with a high-growth production profile, so I think we're going to hear a lot from Silvercorp down the road."
As you know, junior miners, even the producers, can be painfully volatile. "Swim at your own risk" and buy on pull-backs are two pieces of advise I've received on the juniors.
If you're interested in a China National Gold-backed junior company take a look at Jinshan Gold (JINFF.PK). This is a high-risk and potentially high-reward company, and how they describe themself is as follows:
Jinshan is a mining company whose principal asset is the CSH gold mine located in Inner Mongolia, China. Jinshan's shares are listed on the Toronto stock exchange under the symbol JIN. China National Gold Corporation, a Chinese state-owned enterprise and the largest gold producer in China owns approximately 41% of Jinshan's shares.
I own some Jinshan shares which I purchased after China National Gold stepped in. Since then the shares are down over 50% with the credit crisis carnage of the past year. My next "Chinese Junior Miner" will be SVM which I intend to buy on a pull-back.
Matt Badiali, writing for the Daily Wealth (www.dailywealth.com) gave us all some keen insights about the potential for silver and gold mining in China. He wrote on 7/30/09:
"Welcoming foreign mining expertise has completely reinvented the nation's [China's] mineral industry. In 1997, China produced just 45.8 million ounces of silver. In 2007 (the most recent data available), it produced 160 million ounces. Its gold production rose 134% over that same period.
"In other words, the country went from practically no silver or gold production to become the third-largest silver producer and the largest gold producer in the world in less than 20 years – thanks to the government's push.
"The thing to remember is, while these mining regions have been open to foreign exploration for more than a decade, most of China's enormous wealth of metal is still in the ground.
"Mines don't appear overnight. Exploration and mine development take years. China's decades-old decision to open its mineral resources to foreign mining companies is just now coming to fruition.
"And now, China's government is providing an enormous boost to its mining industry: In April, the country's Foreign-Exchange Agency announced the purchase of 16 million ounces of gold for state coffers. It wants to diversify its reserves, replacing some of its U.S. dollars with something tangible – like gold."
Matt claims that about a dozen publicly-traded companies are "... mining or exploring for China's massive gold and silver deposits. Many of them are plenty risky... and some are complete duds." So we all have to do very careful due diligence before we nibble on any mining company, especially the juniors.
So diversify, don't put all your eggs in one basket, and know the risks you are taking. If you can't stand much risk, buy companies like Silver Standard Resources (Nasdaq:SSRI), Silver Wheaton (NYSE:SLW) and Pan American Silver (Nasdaq:PAAS) when they've gone "on sale" after some nice pullbacks. Of course there is also SLV, the Silver ETF.
Take a look at this one-year chart of SSRI with the 50, 100, and 200-day moving average. Do you detect a trend in silver and silver producers? I certainly do, and it looks quite bullish to me. This chart does not include the July 31st upside on SSRI which adds another 4% taking the price up to $19.77.
Disclosure: I do own SLV,CEF and JINFF.PK
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