“The World’s Largest Silver Resource Base Has Now Become Attractively Priced”
So goes the headline for Dr. Stephen Leeb’s new teaser ad — and he tells us that we should …
“Buy now for stunning potential growth!”
It’s no surprise that Leeb is a commodity booster — he got a lot of attention for peak oil pronouncements in the past, and was often quoted in oil’s run to nearly $150 back before the bubble burst … and he’s still pushing a commodity-focused strategy, commenting, like most of his ilk, on the pressure that the Chinese are bringing to bear with their demand for copper and oil, and on the failing fiat currencies of the world.
Not that I necessarily disagree with the broad premise, of course, though I’m wrong at least as often as he is.
He tells us that “Silver prices could easily climb to $90 an ounce over the next few years,” which would obviously be a boon for any silver miner worth his zinc. So which silver investment is he teasing today?
Well, to get the word from the Doctor’s mouth you’ll have to pony up $249 every three months for a subscription to Leeb’s Real World Investing … he’ll toss in a silver Eagle, he says, for each payment, but that’s still a pricey commitment for many. So shall we look at the clues and see which stock it is that he’s all hot and bothered about?
I thought you’d like that plan. Very well then, some clues please?
“As silver prices rise, shares of most silver producers could rise even faster. And one in particular looks very appealing.
“The company owns the world’s largest silver resource base, amounting to some 286.8 million ounces of proven and probable reserves, plus another 532.1 million ounces inferred. At today’s prices, that’s worth over $13 billion.
“Yet, right now you can buy shares in this silver company for a very attractive price. The company has just opened its first silver mine and production is only just getting started. This year it is expected to reach 7 million ounces – increasing to 8-10 million ounces next year. By then silver prices may be considerably higher, which could boost the company’s profits considerably.
“And there’s a kicker. The company also owns gold resources of 26.2 million ounces proven and probable, plus another 16.3 million inferred. Which means it will also profit from the current long-term bull market in gold.”
Does that sound like any of our big silver mining friends? Indeed, Leeb is a bit off with a few of those clues, but as confirmed by the all-powerful Thinkolator this must be … Silver Standard Resources (SSRI in NY, SSO in Toronto).
SSRI does indeed claim 286.8 million ounces of silver in their “proven and probable” reserves category, which is a fraction of their total measured, indicated and inferred reserves base. And they did just start up commercial production at their first mine late last year, that being Pirquitas in Argentina. They do not have any proven and probable gold reserves to speak of yet, though, the 26.2 million ounces is almost all from the Snowfield and Brucejack properties in British Columbia (and it’s actually 26.31 million ounces of measured and indicated, and another 16.25 of inferred). “Proven and probable” is going to require more drilling (which they are doing), and possibly the electrification of the area that has been teased by Matt Badiali and others (Snowfield and Brucejack are in NW British Columbia, the area that Badiali teased as the “golden triangle” poised to profit from the new NW transmission line planned to bring electricity to the area and make mining more affordable — for what it’s worth, I speculated that SSRI might be one of Badiali’s picks, too, though the clues weren’t detailed enough to confirm).
Silver Standard has taken a tumble in the markets recently, as have so many others — over the past year it has been down a bit while Silver itself was up about 30%, and lower-risk “silver streamer” Silver Wheaton has more than doubled. SSRI is a pretty big stock for a silver miner, with a market cap a bit over a billion dollars, but it does have just the one mine in production now so the shares can be very volatile based on the prospects for their other major prospects, including those gold resources as well as (mostly silver) mines and exploration targets in Peru, Mexico and elsewhere. The Peruvian mine, San Luis in Ancash, Peru, is the most advanced, it has a completed feasibility study as of this month, but the other projects are quite a ways from pulling stuff out of the ground. Still, even with just one mine operating SSRI is expected by analysts to turn a profit soon, with estimated earnings of 30 cents per share this year and 46 cents next year — still expensive, if that was all you were buying, with a forward PE of 38, but certainly any projections for SSRI have to assign some value to their other gold and silver resources and reserves.
Of course, if silver goes back to $12 an ounce … look out below.
I’ve stated before that I find SSRI intriguing thanks to their current production and possible future projects, particularly the possible boost if they’re able to make Brucejack and Snowfields feasible and book those reserves in the coming years, but I don’t know that there’s a particular rush (though Leeb calls this an “urgent opportunity”), and I’ve never owned shares of this one myself. If you’re excited about silver, Luke Burgess has been telling us that SSRI is “Wall Street’s Favorite Silver Stock” for quite a while and teasing out his favorite “next SSRI” candidate, which I revealed back in September was CDE (the teaser is still running as of the last week or so, I haven’t re-checked but I imagine the details are unchanged) — you can see that article here if you’re looking for other silver ideas.
Or if you’ve some favorite ideas for investing in silver I’m all ears — share them with the world by using the friendly little comment box below. I don’t personally own any primary silver miners right now, though I’m sure there’s some minor silver mining exposure in my portfolio and I do own some silver coins. If you’ve ever subscribed to Leeb’s Real World Investing, just click here to share your experiences with your fellow investors at Stock Gumshoe Reviews (we have only a couple reviews of that particular letter, but you can see all of the Leeb newsletters reviewed here). Thanks for sharing your thoughts!