“The Great Bull Market in Silver Has Begun! And This Jr. Mining Company Is THE Best Way To Profit From The Surge.”

By Travis Johnson, Stock Gumshoe, November 4, 2010

That headline sits atop a teaser ad that I started receiving on Tuesday this week from Tim Fields for his Untapped Wealth newsletter.

Now, I should warn you up front that this newsletter has recommended some real doozies in the past, like that silly “forever battery,” and they’ve gotten involved in some stock promotion that I think taints their name a bit (though that was a couple years ago for Aussie Soles, which I don’t think is traded anymore, and they do distinguish between their “independent” research and their “paid advertisments”).

And like many publishers they also re-use their teasers for years — like many companies (notably the Motley Fool, but most of them do it), they tease “special reports” that come “free” with subscriptions, and on this latest offer of theirs that teases a silver miner the “special reports” include their WiMax and “Forever Battery” and geothermal pieces that first were touted years ago (I hope they’ve updated these, because my snooping told me that geothermal “special report” they teased back in early 2008 must have focused on Raser Technologies, a pick made by several newsletters that ended up being last year’s “Turkey of the Year” and now trades for pennies).

Still, I don’t think I’ve seen this silver miner ad before … and silver is hitting new highs (or close to it) even as I type, so I thought I’d try to answer reader questions and figure out which “junior miner” he’s talking about.

Fields lays out basically the same spiel that all other inflation/precious metals folks use, that the global financial system is in peril, and that governments are fighting to devalue their currency and create new money to bail out failing states and companies, which will lead inexorably to a return to individuals and sovereign treasuries covering “real money” like gold and silver and other “real” hard assets. And that we’ll probably return to the historical average gold/silver ratio — though lots of folks argue about what ratio we should look for. The ratio has been as high as almost 100 and as low as about 12 over the past 100 years, though it was set in the mid-teens in the 1800s as a matter of law, and most geologists seem to think the natural ratio in the earth’s crust is somewhere around 17 (17X more silver than gold) … though silver is consumed/destroyed and gold is typically not, and silver has industrial demand to a far greater degree than gold. I wouldn’t hold my breath waiting for a specific “average” ratio to hit, since the ratio has been wildly volatile over the years, but it is pretty high now at over 50. (And of course, it’s possible that if the ratio has to return to “normal” then it could do so by gold falling just as easily as silver rising.)

Silver doesn’t get the attention of gold, but it has certainly gone up faster — with many folks considering it the “poor man’s gold” since it’s a lot easier to come up with $25 for a silver coin than $1400 for a gold coin. Here’s what the tease says:

“With commodities hitting record highs on an almost daily basis, this company, is without a doubt, your best chance to profit from silver’s coming rise.

“You see the question is not if silver will go from $23 to $80… or if this company will surpass 150%, 233%, or even 450% gains.

“As you’ll see, it’s when.

“And I believe the answer is very soon. “

So, with $80 silver we’d obviously see some extremely healthy returns for any silver miner … but he’s picking out just one for us to focus on. How about some details to pique our appetite? (Or as I like to call ’em, “clues.”)

“Miles ahead of the competition – This company is on the cusp of becoming the most prolific producer in the North America [sic] ….

“Silver’s coming increase should be great news for any junior mining company. But we’re not talking about just another junior mining company….

“… what this company has done is extremely clever. They went back and acquired the rights to one of the most prolific proven silver producing mines in the world.

“Without much fanfare they gobbled up as much of it and the surrounding area as possible. Initial estimates are 100 million ounces of silver. With one of the lowest extraction costs in the world of just $1.91 an ounce (and that’s on the high side) there’s $21.09 left of profit per ounce at current silver prices.”

Of course, now that silver’s gone quickly over $25 that’s even more profit (though when you see these kinds of “extraction costs” or “cash costs” it’s always wise to be a little bit leery when calculating a miner’s profitability, those typically don’t take into account the huge exploration and development costs — that’s why most big gold miners probably have “real” costs of $800-1,000 instead of the $300-500 that many of them claim as “cash costs per ounce”).

But still, that sounds like a pretty low cost for extraction. Not bad. Some more clues?

“… they acquired this property when silver was trading around $11 an ounce.”

And one more tidbit …

“With 4 mines in total and projected and probably reserves surpassing 346 million that can be mined any time they choose. Smartly, they’re watching the price of silver increase on almost a daily basis.

“Their current share price reflects NOT mining any of their reserves. What do you suppose will happen the moment they do? Well, if you believe as I do that their stock will quickly multiply then NOW is the time to act.”

So hoo dat? Well, with 346 million ounces of “probably reserves” (we’ll assume that they’re fudging a bit to include reserves and resources), four mines, and an extraction cost of $1.91 we must be talking about …

The decidedly non-junior (at least in my book) Hecla Mining (HL).

Hecla is the largest producer of silver in the US, and the oldest miner in this country. They produced a new record (for them) of almost 11 million ounces of silver last year, and have been projecting that this year will total something similar to that. They have a market cap of just under $2 billion, which is small compared to some of the major gold miners … but there are only a handful of major pure play silver miners, and Hecla is one of the biggest — about the same size as Coeur d’Alene (CDE), Silver Standard Resources (SSRI) or Silvercorp (SVM) and a bit smaller than Pan American Silver (PAAS).

Hecla is a low-cost miner, with two operating mines and two exploration districts — and they’ve been pulling in the cash lately, you can see the latest details in the highlights from their third quarter report (came out a couple weeks ago) — they do still claim the extraction costs of $1.91 per ounce on their website, but recent “cash costs” have been negative thanks to byproduct credits (gold and copper, typically, though I haven’t checked what their output is), and the 346 million ounces was claimed as their “reserves and resources” number in an old investor fact sheet, though they don’t seem to use that number in their current material.

Hecla has often been mentioned to me as the “cheapest” silver miner, though there’s almost always a good reason for that (usually a history of disappointment, or a perception that they won’t be growing production anytime soon, though I don’t know what has made Hecla lag in valuation compared to some of their silver peers). The perceived lower valuation hasn’t hurt the comparative performance, over the past one, two and five years HL has had at least average share price performance compared to the other big silver names I mentioned (and indeed, compared to the metal itself).

That said, most of these stocks trade, as you would expect, pretty close to in lockstep with one another — bit reserves increases or earnings blowouts or new discoveries obviously sometimes help relative performance, as does increasing attention, but if you’re buying just one of the big silver miners and don’t want to specifically bet that Hecla will outperform their competitors Coeur d’Alene or Silver Standard, for example, you could also always just buy a basket or buy the new Silver Miners ETF (this came out from GlobalX earlier in the year, ticker SIL — HL is in the top ten holdings, as are some of the big Latin American miners and the others I’ve mentioned above).

Actually, if you had bought the silver miners ETF when it was introduced you would have done a little better with that than with SSRI, PAAS, HL, SVM or CDE … and even slightly better than the metal itself (as represented by SLV). There have obviously been silver miners who outperformed that index ETF — Fresnillo (FLNLF on the pink sheets), the top holding in that fund, did better than the index, as did the third largest holding, Silver Wheaton (SLW), which isn’t really a miner — since someone has to be above average, but the average beaters weren’t Hecla or any of the other major miners whose names came immediately to mind … and it’s certainly easier to buy a basket and not worry too much about whether one of the companies screws up.

Hecla definitely has had some great performance in recent years, particularly if you bought it a year or more ago when they hadn’t taken complete control of their huge Alaska mine, and they were producing far less and seemed a bit overleveraged and risky (the shares have more than doubled since Outstanding Investments teased them in August of 2009 when they weren’t yet profitable, for example), but I don’t know much more about the company than that — I do know that many of my readers have owned the stock in the past, so if you’ve got an opinion on Hecla (or any other favorite silver miner, for that matter), feel free to share it with a comment below.


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31 Comments on "“The Great Bull Market in Silver Has Begun! And This Jr. Mining Company Is THE Best Way To Profit From The Surge.”"

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Peter
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Peter
November 4, 2010 2:14 pm

American B-52 Nuclear Bomb Missing Under “Ancient Ice Fields” What company is this?

OliverR
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OliverR
November 4, 2010 2:30 pm

I bought HL at $1 back in Nov. of 2008, only problem is I sold it at 2.75

Myron Martin
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Myron Martin
November 4, 2010 2:47 pm
Have owned Hecla for some time and intended to buy more, but it seems some other priority always got in the way, still think it is a good stock with lots of upside potential. My favourite silver stock is actually First Majestic FR-V which I bought in 2004 @ $1.60 and today as a matter of fact hit a 52 wk. HIGH @ $9.43 which is nicely over a 50% per year gain.Nearly as impressive are 2 other silver stocks i own that also made 52 wk. highs today, Silvercorp SVM I bought even cheaper and held for less years… Read more »
Tejas
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Tejas
November 4, 2010 3:17 pm

Well done to your research….In 2004, you must have been one of those early investors to pile in silver.

Chris Andershock
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Chris Andershock
November 4, 2010 3:28 pm

I own Great Panther Silver too, should have bought more at the time unfortunately. Remember silver is more volatile than gold, so what the Lord giveth he can taketh away quickly.

patrick o'sullivan
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patrick o'sullivan
November 4, 2010 3:31 pm

Hi Travis,can you give us all a complete low-down on the zurich kantonal's etf gold bullion sgol in switzerland.Ibelieve they have someting similar in silver aswell..many regards.paddy

jeff
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jeff
November 4, 2010 3:42 pm

The headline is an indicator to short the hell out of silver!!!

jbnaples
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jbnaples
November 4, 2010 3:44 pm

I bought HL @ $4.80 at the same time That I bought SLW @ $17.50. HL has been slow to climb compared to SLW. These were my first picks in this sector. It's a fun ride. Weak Dollar means strong silver and oil. Good luck.

Jane
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Jane
November 4, 2010 6:37 pm

Does Outstanding Investments still have a BUY on Hecla?

Zook
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Zook
November 4, 2010 7:51 pm

I found Greenland energy & minerals GDLNF pink sheets independently. This is the touted stock.

Meg
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Meg
November 5, 2010 1:34 am

Thank-you, folks, for telling about experiences with various miners. My best-performer in the sector has been AUMN. It doubled between 9/17 and 10/19,, and continues in a strong uptrend. When gold and silver are on the rise, I really enjoy riding on their backs. And with the dollar falling, the miners are drawing new fans.

Redrum180
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Redrum180
November 5, 2010 1:41 am

My favorite silver stock is Bear Creek Mining, BCEKF, a Canadian stock selling for about 8.40 US. They have well in excess of 500 million ounces of silver. I also own SSRI and a junior speculative company, US symbol CMCXF, which seems to have a nice discovery in the Yukon. Do your own due diligence.

Jack
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Jack
November 5, 2010 6:32 pm

If you get screwed,Burned, ripped off, taken advantage of, CLIENTSRFIRST.com is worth checking out

Bud
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Bud
November 6, 2010 3:34 pm

Check out axr-Alexco,this baby is in the yukon and supposedly yhe purest silver out there,while not totally on fire its doing well

ReleaseDigital
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ReleaseDigital
November 9, 2010 1:22 am

Guys, GGC.TO all the way, already doubled on me and doesn't seem to stop, was $4 in 2007 when price of silver was $15, recently restarted production. The mine has been explored since the Aztecs and they don't even need to go deep into the surface yet to fully explore it.

Here's the latest interview with the CEO: http://tinyurl.com/2fekgwe

Frank Boas
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Frank Boas
November 9, 2010 5:57 pm

anyone following cpmcf ?

DFrat
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DFrat
November 12, 2010 9:09 am

Jeff, do you have an email that I could ask you a couple questions?

Boneafide
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Boneafide
December 19, 2010 2:57 pm

Check out . http://www.aurcana.com/s/Home.asp

– CAD 0.68
– Silver producer with properties in Texas (Shafter) and Mexico (La Negra)
– Top notch management
– Heavy consistent insider buying
– La Negra – Mine already in production, recently expanded to produce 1,200,000 ounces silver, 5 million pounds copper and 5 million lbs of zinc annually
– Shafter – $85 M financing secured Nov 2010, mine construction to take 18 months. Solid financials, with payback in 2 years assuming $15.53 silver (Silver is around $28)
– Potential to QUADRUPLE silver production to 6 million ounces annually

Boneafide
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Boneafide
December 19, 2010 3:02 pm

Switching to Gold, check out:

1. http://www.goldenbandresources.com/index.cfm

– CAD 0.67
– First gold pour expected Ist quarter 2011. Announcement of this is imminent and could strongly boost the stock price
– Top notch management
– Heavy consistent insider buying
– Saskatchewan-based, owns a land package of more than 750 km2, including twelve known gold deposits, four former producing gold mines, and licensed gold mill.

Wayne
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Wayne
August 29, 2011 12:28 am

What is your take on silver now? Just read your article 42weeks ago on GumShoe blog.
What % of your portfolio do you play sliver and gold?

OliverR
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OliverR
November 4, 2010 2:29 pm

GNDLF

Eyedoc2
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Eyedoc2
November 4, 2010 8:10 pm
Correct symbol for Greenland Minerals is GDLNF, a great buy when they suspended trading in Australia pending announcements from Greenland's new government (for a whole month!) but was still trading on American pink sheets a low as .25 cents since there was no market to guide it, just traders needing to bail out. Once the trading resumed in Australia, the price went to 50 cents, recently zoomed to $1.10 or more (when touted most likely), then dumped to 71 cents and now back over $1.00. All this since August or September. Hope this helps. See Travis's old reports on this.
Peter
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Peter
November 4, 2010 3:22 pm

May be – UCORE RARE METALS
(Other OTC: UURAF.PK)

denny
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denny
November 4, 2010 4:27 pm

GNDLF is not a symbol

dlst
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dlst
November 4, 2010 9:00 pm

GDLNF

Joe
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Joe
November 4, 2010 4:00 pm

OK, I bought slw at 3 and sold it for 7.50, lol. If I had unlimited funds, I would not have done that. Also sold my Helga a while back, so haveleaps on it now. Joe

Peter
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Peter
November 4, 2010 7:04 pm

Yes and the target is $15. Check out PZG also lots of potential

Peter
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Peter
November 4, 2010 7:05 pm

Yes I can't find it. The article talks about a company looking in Greenland.

Henry
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Henry
November 6, 2010 5:29 am

And are you? Are you buying puts, or what? Please do tell :o)

Jeff
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Jeff
December 19, 2010 5:02 pm

Sorry DFrat. Didn't see your question till now. Don't know how to give you my e-mail without giving to the rest of the world…..

Ag $28 Au $1365
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Ag $28 Au $1365
January 15, 2011 6:44 am
Fri Jan 14, 2011 Aurcana Appoints Dr. Peter Megaw to Technical Advisory Committee Aurcana is committed to become a mid-tier silver producer. Annualized pure silver production is on schedule to exceed 5 million ounces (6.0 million ounces silver equivalent) by year 2012. "The Shafter District is one of the most under-explored CRD systems around and presents excellent opportunities for making significant discoveries," stated Peter Megaw, newly appointed Technical Advisor to Aurcana. Aurcana Corp is pleased to announce the appointment of Dr. Peter Megaw to its Technical Advisory Committee. The committee has been established to oversee a major exploration program which… Read more »
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