“A Silver Company You Need to Own NOW” (Dudley Pierce Baker)

Sniffing out what "may be the only silver company you need to own" from a Precious Metals Warrants ad

By Travis Johnson, Stock Gumshoe, February 9, 2012

I don’t believe I’ve ever written about Dudley Baker and his Precious Metals Warrants subscription service, but several folks sent in his latest pitch for subscribers, and it has exactly the kind of teaser promise that we love to unravel, so I thought I’d have a look for you.

Baker has been a warrants/options/futures trader for a long time, though I think his Precious Metals Warrants database and newsletter service started up within the last couple years — he basically offers up a database of all the precious metals warrants that are publicly traded in the US and Canada, and what he calls a “look over his shoulder” at his personal trades (we’ve received just one subscriber review of this oen so far, you can see it here), along with some kind of insider trading data. You can also find most of the publicly traded warrants for free at CanadianWarrants.com and probably other places as well, so I guess it’s largely a question of whether you like his valuation criteria and his portfolio picks.

But the point is, he’s pitching for new subscribers ($99/month) by saying that he’s got what might be “the ONLY Silver Company you need to own.” Which makes us want to ID it for you, whether you want to subscribe to his service or not. Here’s the spiel:

“A Silver Company You Need To Own NOW

“If you are a current subscriber, then you should already know this company. It has been my #1 personal position for almost 2 years.

“Go to Dudley’s Portfolio – “A Look Over My Shoulder” and my Top 25 Positions – XXX is #1 on the list.

“In my audio to be recorded this afternoon and available to you tonight around 8:00pm, CST, I will give more reasons and info on what I believe will be one of the great stories over the next 2 or 3 years….

“This truly may be the ONLY Silver Company you need to own.

“Of course, we, are big believers in diversification which is why we own around 80 different companies but our Top 25 and especially our Top 5 to 10 is where most of our monies are invested.

“Why am I getting more excited now about this Silver Company?

“I am seeing more and more news and secret articles coming out on xxx. The other day the shares jumped up 10 cents on one report.

“You can not wait any longer.

“These shares appear to be on the verge of an upside breakout and you will be paying substantially higher prices.

“Currently the shares are trading around C$0.85 but this may not be for much longer.

“My personal ‘hope’, vision, and analysis points to a minimum of $5 to $10 within two years. Not bad, as this would meet our 5 to 10 bagger definition and depending upon what silver is selling for, this stock could be substantially higher.

“The name of this company is worth far more than the price of our subscription and will return many times your investment. Don’t wait, get started now.”

So what stock are we dealing with here? Well, since we don’t get a lot of specific clues we’ll have to make an educated guesstimation using the less-than-certain output of the Thinkolator this time around … Thinkolator + Gumshoe Cogitationizer = solid chance that this is Aurcana Corp (AUN in Canada, AUNFF for the OTCQX listing on the pink sheets … OTCQX is just an extra level of “almost listing” certification from the pink sheets folks).

Aurcana is a silver miner, with two “restart” primary silver mines that have decades of production behind them but are expanded or otherwise restarted or about to be restarted — the La Luna mine in Mexico is now producing at about a million ounce/year rate and has the chance to upgrade that by perhaps 50% as they boost production this year, and the Shafter mine in Texas is expected to be operational this year and start production at a much higher level, around 3.8 million ounces/year starting midyear 2012.

The company is already fairly large for a junior miner, but this 5+ million ounce production level would vault them up into the middle tier of silver miners with companies like Endeavour and Fortuna. Right now, Aurcana is roughly (OK, very roughly — and counting the dilution of Aurcana’s big pile of 2013 warrants) half the size of those two miners. Interestingly enough, part of what has probably been holding Aurcana back is a lack of certified reserves, particularly for La Negra — but production has been increasing markedly and the vast majority (over 80%) of their recent production has been from areas that weren’t in their reserve base, areas of new discovery or areas that weren’t part of their measured and indicated resource base. I don’t know if that’s common, but it would indicate to me (a non-expert in mining or geology, let’s be clear) that their production potential should be higher and longer-lived than their limited reserve base might otherwise imply.

There’s a presentation up from Aurcana with December numbers now that you can view if you like, and their latest production update from January is here. The shares will certainly be buffetted by the very volatile price of silver as it moves around this year, but they say their cash costs are down around $10/ounce (they bought back Silver Wheaton’s 50% silver stream on La Negra a couple years ago), so they ought to be able to produce plenty of silver if they get the new mine opened on schedule this year (it is permitted and under construction now), with at least an outside chance of getting production up to between 7-9 million ounces/year by late in 2013. I have no idea whether or not we’ll see a $5 or $10 share price for Aurcana in the next few years as Baker seems to believe, but with their big mine set to open this year and with expected upgrades to their reserves base to be released sometime this quarter, it is certainly a pivotal time for the company.

And yes, they do trade at about 85 cents, and have gotten some attention from investors lately, including a spike of about 10 cents a few days ago when a Motley Fool writer called them the “greatest growth story in silver” in an interview with CEO Lenic Rodriguez. I don’t know if you can call that a “secret” story, but it did move the price, and there are certainly plenty of newsletter writers that could be jumping aboard the stock — it’s hard to resist growth stories like this when you have a pretty good level of predictability about a dramatic surge in production. That’s not to say that part of that growth and optimism might not be built into the share price, since these things have been projected for quite a while.

So there you have it — I’m fairly sure that this must be Baker’s “silver company you need to own NOW,” and it does look like this will be a big year or two coming for them. As to whether they’re right for your portfolio or you trust the company’s potential, well, that’s your call — let us know what you think (or if you’ve got another favorite silver play) with a comment below.

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