Picking the best precious metal juniors
It was intriguing to watch Dr. Marc Faber announce on Bloomberg TV over the weekend that he now favored the acquisition of selected gold stocks and gold exploration shares, as well as renewing his long-held hold on gold.
Every now and again somebody writes to me and asks: what are your favorite precious metal juniors? And I do also include silver juniors because my logic suggests they could deliver the best bull market performance of the lot: silver prices being leveraged to gold and the junior explorers leveraged against the out-performance of silver producers.
Silver over gold?
So that is why I would buy a small explorer like Endeavour Silver – presently 65 per cent off its one-year high. Dr. Faber intelligently views these 40-year low prices for the juniors of the precious metal world as a buy signal – most investors find it terrifying, especially the owners of these shares.
Endeavour was highly rated by Golddrivers.com, a website that specializes in these stocks. But then the same website tipped Candente Resource Group, off 90 per cent from its one-year peak price. If the original Golddrivers.com tip was right this is a hell of a bargain.
You could say the same for Linux Gold – which like these other two stocks I also hold. This company has seen its stock drop 80 per cent, and yet it still owns the same world-class mining claims on Granite Mountain in Alaska, next to several existing large mines, has remarkably managed to raise funds in a private placing and looks highly unlikely to go bust.
Shorts off
Perhaps the guys who have been shorting my stocks will now stop and go long! Another smaller gold company, albeit with proven low-cost reserves under a town in Australia, Citigold is a group I have been looking at closely. Dubai bought a significant stake recently which brought its cash levels up, and yet it is still 50 per cent down on the past year.
Even if there is not actually going to be gold in them there hills, there is going to be money to be made in these stocks. What they own are claims to potential gold mines – and Citigold is closer than the rest – and in a bull market for gold the value of such claims always grows exponentially.
Consider claims to be like land for house builders – something that surges in value during a boom. Given that analysts at Citigroup see gold up from $820 to $2,000 an ounce next year, the implications for junior precious metal stocks are clear, and Marc Faber’s timing is spot-on as usual.
Vancouver, Canada – December 17, 2008 – Endeavour Silver Corp. (EDR: TSX, EJD: DBFrankfurt and EXK: NYSE Alternext US) announces that it has arranged a CA$4 million private placement financing of special warrants brokered by certain Canadian placement agencies. The agents have an oversubscription right to place up to an additional CA$1 million and the financing is expected to close no later than December 30, 2008, subject to TSX and regulatory approvals.
The private placement will consist of up to 3,080,000 special warrants priced at CA$1.30 per special warrant for gross proceeds of up to CA$4,004,000. Each special warrant is exchangeable for one common share and one half share purchase warrant. Each full share purchase warrant can be exercised to purchase an additional common share at an exercise price of CA$1.90 per share within a 5 year period from the earlier of the closing of the placement plus 60 days, or from the issuance of a final receipt for a prospectus to qualify the special warrants in all relevant Canadian jurisdictions.
peterjcooper
December 18, 2008 at 8:50 am
Peter, recently the comments of some commentators such as Roland Watson (silver analyst) would seem to categorise silver in the industrial commodity basket citing deflationary pressures as causing (apart from a small rally)a probabled futher breakdown in value.
Citing historical precedents,the deflation post 1930’s depression is used as an example of a catastrophic loss of value in silver.
A further tenet to the article is the rejection of various threads from Ted Butler/Jason Hommel that the lack of silver supply will drive future silver prices up.Indeed his arguement is that it is the type of product -Coins/100 oz bars etc that is in demand and not the product eg 1000 oz bars sold at a small premium above spot.
Other concerns from the recent comments of Marc Faber’s relate to gold with no comment as to silver.This is in tune with other commentators such as Jim Sinclair who rarely mention silver.Here it is all gold which irrespective of hyperinflation or deflation will become a store of value in the monetary sense.
Marc did not also in his article comment on whether he would hold on to his gold based invetments on an implosion of the economy early next year.
Could you please comment on silver/deflation arguement and the lack of precedence given by Marc Faber and others to silver as a store of monetary value and not in its capacity as a pure industrial commodity.Also will he hold onto gold early next year.Thanking you in anticipation-AF
Aled
December 3, 2008 at 10:35 am