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  • The Only PGM Stock You Should Buy
    By Jeff Clark, Senior Precious Metals Analyst

    It's quite the dilemma.

    One of the major reasons my colleagues and I are so bullish on platinum group metals (NYSEARCA:PGM)-palladium, in particular-is because of the intractable problems with supply. But most of the producers are backed into corners, with few options for improving their outlook. There's simply no way for these metals to avoid a long-term production deficit due to the deep seated problems with the companies that produce them.

    So, how to invest?

    Since we're talking about profiting from a metals bull market, we could just buy bullion-and we have indeed recommended doing so to our readers. But to really maximize your leverage to the upside (and avoid more risky futures and options), a stock in a company that produces the metal is normally the way to go. Unfortunately, as above, the pickings are slim.

    For us to invest in a PGM producer, the company would have to be:

    • Outside of South Africa and Russia. The problems with miners in both countries are numerous and difficult.
    • Making money. Many producers are not profitable at current prices because production costs are so high. And they won't come down just because the strikes ended-they'll go up, due to higher wages.
    • Have a strong growth profile. We want a company that can capitalize on burgeoning demand, which would add further leverage to our investment.
    • Have strong management (of course!). The last thing we want is a team with no experience navigating a volatile market such as this.

    Does such a stock exist?

    It's a tall order, but the answer is yes. The company we recommend in this area meets all the criteria above-and is the safest speculation in this space. We consider it so safe, in fact, that we just "graduated" it from the International Speculator to BIG GOLD.

     

    How's This for Leverage?

    This profitable mid-tier producer is perfectly positioned: it's not so small that we're purely speculating on some uncertain game changing event, and yet it's small enough to generate much larger share price gains than would be possible for one of the major mining companies. On the other hand, it's big enough to catch the attention of mainstream investors.

    Here are seven reasons why we're excited about this company and the leverage we think we'll get by owning shares…...

    #1: Large, High-Grade Assets

    The company has two distinct but closely related mine sites. These alone will support the company's growth for many years. However, only nine miles of an estimated 28 miles of known mineralization has been developed between them-essentially one third of one giant mineralized structure. Management thinks it has an additional 102 million tonnes of undeveloped resources waiting to be dug up.

    And get this: the average grade of their proven and probable reserves is 0.45 ounces per tonne, the world's highest grade PGM deposit. Of these, 78% is palladium, a very attractive figure since we're even more bullish on it than platinum. At the right metals prices, this company could double or triple production and still maintain a very long mine life.

    #2: Growing Production and Low Costs

    The company grew 2013 production by 10,000 ounces, but has yet to use all its milling capacity. It currently uses about 3,600 tonnes per day (tpd) of its 6,000 tpd total capacity. The company is working to increase ore production this year, which is good timing for us.

    With a much cleaner balance sheet and a forecast of $800-$850 per ounce for all-in sustaining costs (AISC) in 2014, the company looks poised to make money in the current price environment-and a lot of money in the supply squeeze we anticipate.

    #3: Recycling Business

    In addition to mining, this company recycles depleted catalyst materials to recover palladium, platinum, and rhodium at its smelter and base metal refinery. It's been doing this since 1997, and business is booming. Pre-tax earnings last year rose a whopping 233% over 2012. And management says it will expand this end of their business over the next few years.

    #4: Strong Financial Performance

    This company reported over a billion dollars of revenue last year, up nearly 30% from 2012. It finished the year with a very strong working capital position of almost a half billion dollars.

    #5: Unique North American Operations

    The company is one of only a few PGM producers in North America. Nearly all other PGM mines operate in South Africa (Impala, Amplats, Lonmin, etc.) or Russia (Norilsk). Therefore, this company is more stable than most that mine in other jurisdictions.

    #6: Upgraded Management

    A prior management team made a poor investment in Argentina a few years back, which led to major changes in the board of directors and top management last year. The new president and CEO is a 21-year industry veteran and has experience in both M&A and mine optimization. He's already corrected past mistakes, and we're happy with the direction he's taken the company. The technical people on the ground seem competent and are getting admirable results.

    And finally…...

    #7: We've Been There!

    Our Chief Metals Investment Strategist Louis James, who conducted a due diligence trip to the company's operations last year, says:

    I liked the story when I visited and considered it to be the company to buy in a safe mining jurisdiction. But I didn't want to bet on the team in place at the time. Flash forward and now it's under new management, which is very focused on cutting costs and expanding the core business. The company's results for 2013 were quite impressive, and I expect them to get better going forward. I'm convinced this company is uniquely positioned to benefit from potential supply shortages. Coupled with a likely rise in demand from the global auto industry in the years ahead, this stock is a very attractive play.

    Here's a picture from his visit.

    Pay dirt: this is what the company's palladium-platinum mineralization looks like before blasting. You can see the closely spaced holes that will be blasted a fraction of a second before the surrounding ones-in successive waves-so the ore is blasted inward. This high-grade resource in a safe and stable jurisdiction is the heart of our speculation.

    The Only Stock to Buy, in a Market Backed into a Corner

    Johnson Matthey, the world's leading authority on PGMs, estimates the platinum market will register a deficit of at least 1.2 million ounces this year. This would be the largest shortfall since it first compiled data in 1975.

    While it will take an enormous amount of time and expense to recover from the strikes in South Africa, that's only the first layer of problems for the industry:

    • According to consultancy GFMS, 300,000 ounces of platinum and 165,000 ounces of palladium could be lost after the strikes end, as it will take time and money to ramp up to full capacity-if that's even possible since some mines have been damaged. The Implats CEO said it will take his company at least three months to return to full production, and they've already put the development of three new replacement shafts in the Rustenburg area on hold. Anglo American announced just last week that it plans to sell its platinum operations.
    • Holdings of physically backed palladium ETFs continue to hit record highs. In less than two months, a half million ounces were added to ETFs. Fund holdings will likely continue to climb and push the palladium market further into deficit.
    • The Russian government has been reportedly buying palladium from local producers, since it appears its stockpiles are near exhaustion. Exports ticked higher last month, but that was likely in anticipation of potential sanctions.
    • Some recyclers announced they are holding back on sales, as they believe prices will move higher.
    • Platinum demand in India is expected to grow 35% this year.
    • Reports have surfaced that tout replacements to platinum and/or palladium. However, these are mostly research projects and are at least two to three years away from commercial viability (some will never make it).
    • Auto sales in the US, China, and Europe, the three biggest regions by consumption, were up 12% through May over 2013.
    • Existing stockpiles of these metals have dwindled. Based on prior estimates from Citigroup, only nine weeks of palladium and 22 weeks of platinum supplies remain-and half of those are in Russia. Standard Bank projects that stockpiled material from South African producers will run out in a month or less.

    The key point is that platinum and palladium supply is in a structural deficit. Prices will pull back now that the strikes have ended-and that is your opportunity. The bull market in these metals is really just getting underway.

    And we have the primo pick in the space. The shares of this stock would have to climb 50% just to match its 2011 highs-and that's without the platinum/palladium supply crunch we're speculating on. As you've surmised by now, I can't give away the name of this stock in fairness to paid subscribers. But you can get it by giving BIG GOLD a risk free try. You'll receive our full analysis and specific buy guidance, along with an exclusive discount on a popular gold coin in the June issue. And, if you want the absolute safest way to invest in PGMs, check out the options recommended in the May issue.

    If you're not 100% satisfied with the newsletter, simply cancel during the 3-month trial period for a full refund-no questions asked. Whatever you do, though, don't miss out on the best stock pick in the PGM bull market. Click Here to learn more about BIG GOLD or Click Here to go straight to the order form.

    The article The Only PGM Stock You Should Buy was originally published at Casey Research

    Check out our "Beginner's Guide to Trading Options"....Just Click Here! - See more at: crudeoiltrader.blogspot.com/2014/06/the-...

    Jun 25 2:11 PM | Link | Comment!
  • Bear Market Cycle Bottom Forming In Gold And Gold Stocks Right Now!

    Today our trading partner David Banister takes a look at the Bullish Percent Index chart relative to Gold's cycle and Gold Stocks.

    Essentially it tells you what percentage of Gold sector stocks are at or above a moving average, which normally would be 50 days. When 70% or more are above a 50 day moving average, sectors can be peaking out. If you look at our chart at the bottom, we have labeled various incidents with A, B, C, and D.

    A. The precious metal as we all know peaked in the fall of 2011 at $1923 per ounce, and the Bullish percent index was at 80%! Usually at 30% or so, they are bottoming out in most cases.

    B. We saw a rare case in the summer of 2013 where the Bullish percent index for Gold stocks was at 0%, yes that is not a miss-print.

    C. Gold bottomed at 1181 in late June 2013, and then rallied up to 1434 and we saw Gold stocks rally 40-80% in individual cases and the Bullish percent index rallied up to 55%.

    D. If we fast forward to December 2013, we have Gold pulling back in the final 5th wave down from the Bull cycle highs in August 2011 at $1923. The Bullish percent index is back to 10% and heading towards 0 or close once again. At the same time, the Gold miners index ETF (GDX) is at 5 year lows and even lower than June-July 2013 lows.

    These types of indicators are coming to a pivot point where Gold is testing the summer 1181 lows and may go a bit lower to the 1090 ranges. At the same time, we see bottoming 5th wave patterns combining with public sentiment, bullish percent indexes, and 5 year lows in Gold stocks. This is how bottom in Bear cycles form and you are witnessing the makings of a huge bottom between now and early February 2014 if we are right.

    The time to buy Gold and Gold stocks is now during the next 4 - 5 weeks just as we were recommending stocks in late February 2009 with public articles that nobody paid attention to. This is the time to start accumulating quality gold miner and also the precious metals themselves as the bear cycle winds down and the spring comes back to Gold and Silver in 2014.

    Click here to join us at Market Trend Forecast for regular updates on Gold, Silver, and The SP 500 Index. - See more at: crudeoiltrader.blogspot.com/#sthash.ACmtUE5U.dpuf

    Dec 27 9:05 AM | Link | Comment!
  • Energy Stocks & Crude Oil Special Trend Analysis Report

    Crude oil has been trading ways for the past year between the 2011 high and low. The trading range through 2012 has been contracting with a series of lower highs and higher lows. This pennant formation because it is taking place after an uptrend is a bullish pattern with $110 and possibly even $140+ per barrel in the next 6-18 months.

    If you look at the weekly investing chart of crude oil the key support and resistance levels area clearly marked. A breakout of the white pennant will trigger a move to the next support or resistance level. And judging from the positive economic numbers not only form the USA but globally the odds are increased for the $110+ price target to be reached sooner than later.

    Crude Oil Price Chart - Weekly Investing

    (click to enlarge)

    Crude Oil Price Chart - Daily short term Analysis and Target

    If we zoom into the daily chart and analyze price and volume you will notice the $100 per barrel level is potentially only 2-3 days way… But keep in mind whole numbers (decade & Century Numbers) naturally act as support and resistance levels. So when the $100 century price is reached there will be a wave of sellers with fat thumbs who will slam the price back down to the $96 and possibly back down to the $92 level before oil continues higher.

    (click to enlarge)

    Utility Stocks - XLU - Weekly Investing Chart

    The utility sector has done well and continues to look very bullish for 2013. This high dividend paying sector is liked by many and the price action speaks for its self

    (click to enlarge)

    Energy Sector Weekly Investing Chart

    Energy stocks which can be followed using the XLE exchange traded fund (NYSEMKT:ETF) typically leads the price of oil. Looking at energy stocks we can see that they are outperforming the price of crude oil and on the verge of breaking out of a large Cup & Handle pattern. If so then $90 is the next stop but prices may go much higher in the long run.

    (click to enlarge)

    Energy Stocks and Crude Oil Conclusion:

    In short, crude oil is stuck in a large trading range much like gold and silver which I just wrote about here...."Precious Metals & Miners Making Waves and New Trends"

    Once a breakout takes place on either the white or yellow lines on the first crude oil weekly chart we should see oil, energy and utility stocks start making some big moves. Depending on the direction of the breakout (Up or Down) it must be played in that direction to generate substantial profits obviously.

    Click here to get my daily analysis, updates and trade alerts in your inbox

    Chris Vermeulen

    Get our Free Trading Videos, Lessons and eBook today!

    Jan 30 1:14 AM | Link | Comment!
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