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Marc Courtenay
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Marc is the founder and owner of Advanced Investor Technologies, LLC, as well as the publisher and editor at the internationally acclaimed web site www.ChecktheMarkets.com. He holds an MS in Clinical Psychology from California Polytechnic State University, and is a former senior vice-president... More
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  • Silver Opportunities Including China 0 comments
    Jul 31, 2009 1:05 PM | about stocks: GPR, EXK, SVM, KLNDF, JINFF, SSRI, SLW, PAAS, SLV, CEF
    Yes, I'm very bullish on silver over the long run, for all the reasons you can read about on a hundred different web sites. Relative to the price of gold, silver looks undervalued from an historical perspective.
     
    I read a terrific interview that The Gold Report did with Brien Lundin. As editor of Gold Newsletter, one of the world's oldest and most respected precious metals and mining stock advisories, he should be very knowledgeable. With a transition toward an inflationary environment underway, he figures that the worst of the financial crisis has passed and that the market "generally" will not test new lows.
     
    Today's (July 31) rip-roaring upside bias on both gold, silver and other commodities certainly reinforces this picture.
    He was asked about silver and his favorite silver-junior companies at the present time. How he responded (and we thank The Gold Report for sharing this with us and our readers) has me doing a good bit of research and asking questions:
     
    TGR: "You mentioned silver a bit earlier. Any companies in that sector you care to mention?"

    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. (NYSE: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.

    Trusted advisor and analyst Ian McAvity ("Deliberations on a World Market" and one of the directors for The Central Fund of Canada, AMEX:CEF) recently reminded readers of silver's potential and the imbalance between the price of silver and gold at the present time.He also reminds us that silver prices are dependent on how gold moves:
     
    "From the mid-1980's, the Silver/Gold ratio has swung from greater than 80:1 to less than 50:1. Currently at 69:1. To translate, if you can switch one ounce of gold for 80 or more ounces of silver, silver is "cheap" relative to gold; and below 50:1, if you can get one ounce of gold for 45 or 50 oz.of silver, gold is the better bargain. Bit silver does tend to need leadership from gold to plan on the upside".
     
    By the way, Ian will be a keynote speaker at the AAPT/IFTA conference in Chicago (http://ifta2009.com) and he'll speak on the last day of the New Orleans Conference (Oct.8-11) www.neworleansconference.com, and he has agreed to speak at the "Toronto Money Show" Oct. 20-22 (http://www.intershow.com). I hope to hear him personally at one of those venues.
    Do not invest any money you can't afford to loose in junior mining stocks. The reason they are sought after by speculators and traders is that they have amazing upside reward potential if chosen successfully (a.k.a. "if you're very lucky"). They can also go bankrupt quicker than you can sneeze.

     

    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.

    Chart for Silver Standard Resources Inc. (<a href='http://seekingalpha.com/symbol/ssri' title='Silver Standard Resources, Inc'>SSRI</a>)

     Disclosure: I do own SLV,CEF and JINFF.PK

    Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please remember investments can fall as well as rise. And they will! - Advanced Investor Technologies LLC accepts no responsibility for any loss or damage resulting directly or indirectly from the use of this content.

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