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Tuesday
Jul112006

Coeur d’Alene Mines Corp

CoeurLogo1

We don’t normally invest in large companies however, when quality dictates we make an exception.

This company has so much going for it that it is a must for any portfolio containing silver mining stocks. Coeur d' Alene Mines Corporation is one of the largest producers of silver with the added kicker of considerable gold production. Last year this company produced approximately 14 million ounces of silver and just over 130,000 ounces of gold. Their cost of producing silver was close to $4.26 per ounce of silver. Going forward Coeur has not hedged any of its silver or gold production so the stock price will be sensitive to any upward or indeed downward movement of the metal. As believers in the upward direction of both these metals then unhedged stocks are the ones that will give us the biggest boost.

Geographically, Coeur have operations in the U.S., Australia, Argentina, Alaska, Chile and Bolivia. As owners of large parcels of land in South America where exploration is being undertaken the possibility of new discoveries adds to the excitement.

The geopolitical situation in Bolivia does present a risk with the recent government statements causing a sell off in this stock. However, according to Reuters, Vice President Alvaro Garcia has stated that although the government would have a larger role in the industry, he ruled out nationalization similar to that in the oil and gas sphere. It would appear that higher taxation is on the cards but that should manageable. It should also be remembered that their operations in Bolivia are only a part of a much bigger enterprise.

At the start of this year Coeur had silver reserves amounting to 221 million ounces, and gold reserves of 1.3 million ounces. Coeur has a market Capitalisation of $1.215 billion and a P/E ratio of 54 and is currently trading at $4.85 having been above $7.0 before the market sell off. From the chart below we can see that the price has been making steady improvement and is now sitting on its 200 day moving average. By Christmas this stock will be considerably higher so we are buying now regardless of the talk of ‘seasonality’ pullbacks through July and August. Once the herd thinks it can wait it is probably the wrong decision.

CoeurChart1

You can purchase this stock on the NYSE, symbol CDM or on the TSX, symbol CDM.
07 July 2006
Tuesday
Jul112006

The Case for Silver


We believe that silver is a precious metal as well as an industrial one and at the moment is one of the cheapest in the market place. Silver also has many uses, not just decorative as in jewellery but also industrial uses such as photography, which account for approximately 95% of the annual silver consumption. Silver is top of league in terms of conductivity of light and electricity. It is easy to work with and can be shaped to almost any requirement. Silver is highly resistant to corrosion and requires little in the way of maintenance.

The balance of supply and demand is now affecting the price and silver fabrication has grown rapidly while mine output has not. To meet demand suppliers have had to run down their stockpiles. However this solution has only a limited time scale before it becomes depleted thus limiting the supply and forcing prices up. The constant devaluation of currencies worldwide adds to silvers value as a store of wealth and a hedge against inflation similar to its big brother, gold. Many of the arguments related to gold also apply to silver and as gold continues on its own upward path so will silver and it may outperform gold before this Bull Run draws to a close.

Geographically the top five producing countries according to the Institute of Silver are: Peru, Mexico, Australia, China and Chile. The geographic location will be a consideration when we are looking for mining stocks to invest our hard earned cash. The political stability of each country and their government’s acceptance of foreign investment is an important factor. The South American ‘swing’ towards a socialist way of thinking needs to be monitored on a regular basis. It would not be the first time that a government would use the nationalisation of an industry to take the spotlight off its own ineptitude.

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Our intention is to review various silver mining companies and post articles of the stocks that we are buying.
You are invited to comment on these investment decisions as you think fit. It may be that your own research has uncovered a gem and our readers will then benefit from your input.
11 July 2006
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