Stock Picks for 2006
Silver Stock Report
by Jason Hommel, January 5th, 2006.
Two years ago, Jan. 2, 2004, I said to not invest in HL and CDE, as I
calculated that they were overvalued relative to silver. See http://www.silverstockreport.com/reports/silverstockreport16.htm
"And in 3 months, nobody has been able to rationally justify this high valuation to me, nobody from the company, and not a single email from any investor. I believe that this stock trades on market perception, reputation, and momentum. As for me, I'm not buying such intangibles. I'm buying silver in the ground, real assets, or exploration potential."
Today, HL is $4.28/share, for a loss of 50%.
On CDE, at $5.90/share:
"CDE and HL moved up in price significantly for the 3rd week in a row. Most likely due to new investors who know very little about how overpriced these two NYSE listed stocks really are, but all they may feel is that "silver stocks will outperform silver". But I don't think there is any reason for CDE and HL to continue to outperform silver from this point at today's stock prices."
"Now, if we can only get CDE and HL investors to get those two companies to buy physical silver, we will really see the beginning of a bull run in silver."
Today, HL is $4.32/share, for a loss of 27%.
At the time, silver was $5.95/oz., and headed to $8.40 in April 2004, before it crashed.
Today, silver is $9.10/oz. for a gain of 53%.
Those people who paid attention to the big picture fundamentals that I pointed out, and acted accordingly, were well rewarded.
The last two years have been a hard time for silver stock investors, as we've waited for silver to hit new highs again. And during this time, I helped people buy Capstone Gold at $.50/share, which rose to $1.10. I then called the top there, due to an $8 million private placement coming free trading, and I bought Capstone back again at another bottom at $.70, and still own it today at $1.19.
Those are two gains of 120% and 70%. Compounded, those are gains of 267%!
Also, recently, I called the bottom of CZN, buying this summer over 4 months at $.45, and CZN is now at $.90, for 100% gains!
I could mention that I'm sitting on gains of over 500% in Mines Management, but I bought that back in 2003, and it's just not a fair comparison--because that was before the difficult 2004 time period just referenced.
Yes, I lost money on a few stocks, too, but I didn't put much money into those--and subscribers to the look at my portfolio would have seen that, too. My biggest loss right now is Sterling Mining, as I bought too soon at an average of $3.95, which is down 16% to $3.30, but the fundamentals for Sterling are strong, and it has a very loyal following, which recently approved management by 92% of the voting shares.
So, what am I doing now, in 2006? I'd love to tell you!
Let me tell you about a company that has the following:
$33 million Market Cap.
$30 Billion worth of proven and probable reserves (yes, reserves, not resources, and yes, that's $30 Billion, with a B, $30,000,000,000.00, no typo there.)
For leverage of nearly 1000 to one!
They also have a preliminary feasibility study (the plans to mine) indicating cash costs of about 15% of metal value. Interested?
But look, they don't have $30 billion paper dollars in the ground, it's a mineral.
But if this were a gold mine in development, the gold equivalent, at $534/oz. would be:
56 million ounces of gold in proven and probable reserves...
With a prelim feasibility study indicating cash costs of $80/oz.
This would be, by far, the largest gold mine in the world, with the lowest cash costs in the world. What an unbeatable, one-two combination punch!
If this were a silver mine in development, the silver equivalent, at $9.11/oz. would be:
3.3 billion ounces of silver in proven and probable reserves...
With a prelim feasibility study indicating cash costs of $1.36/oz.
That's over 3 times as many silver ounces as owned by either SSRI or PAAS, whose ounces are scattered among over 10-20 projects!
Now, would it really matter if it was gold or silver? No. Of course not, investors would bid up a company like that to well over $1-3 billion in market cap within months, and you'd make from 30 to nearly 100 times your investment, (up to about 10,000% gains) from today's stock price.
But, actually, the mineral is not gold, neither is it silver, it's molybdenum! The beauty of Moly is that we don't have to wait for prices to skyrocket, because they already have, which has created this beautiful investment opportunity. Moly prices have risen over ten fold up to a high of $40/lb., and are now down to $23/lb.
The company has 1.3 billion pounds of moly in reserves, recently valued as high as $45 billion in the ground. Cash costs are $3.50/lb. (15% of today's moly price of $23/lb.)
The free market is based on allowing prices to freely move, as prices are the best indicator of telling us investors what the world wants and needs (and thus what to invest in).
If you believe in the efficiency of the free market at all, you should listen to what moly prices are saying, especially about the profitability implications of moly projects. Moly prices cannot be manipulated to the downside, as they are not traded on any futures exchange.
Moly prices have been above $15/pound for over a year and a half now, and are telling us to invest in a good moly project. It was just over a year ago, that this pre-drilled moly project, (drilled out years ago by Exxon) was acquired by this company, at a fire-sale low price from a private family who had been sitting on it for years.
This moly project will be wildly profitable at moly prices of $7/pound, and higher oil prices will not significantly impact the bottom line of production costs.
This moly project has the highest grades, and lowest costs, of any major moly project (or maybe even any mining project) in the world! The location is Nevada, and it's a stock I've featured before--and I've visited the site, and seen the drill cores in the wearhouses in the fall of 2005, so it's no scam. It's a new opportunity created by new, higher moly prices.
Yesterday and today, I've been buying even more of this junior stock, as its price is now on a dip. For the name of this company, you can either search my old emails, or sign up to the look at my portfolio ($39.95/month): http://www.silverstockreport.com/
There are two other companies I'd like to tell you about, this time by name. These two reports came out just yesterday, and are very timely. One stock is my largest holding, and the other stock I've been buying in the market just yesterday. To see which is which, again, just "Look at my portfolio".
But here are the reports (written by others, not me):
O.T Mining: It’s ‘Our Turn’
By David Zurbuchen
Excerpts: How World-Class Turned into Wasteland (And back to world-class again!)
... Montana once held the much-lauded position of #1 mineral wealth producer in the United States. ...
During the late 1980's and early 1990's a strong nationwide environmental movement
drove mining, oil, and gas operations and exploration offshore. Montana was the base of
operations for the environmental Protection Agency (EPA) and many of the radical NGO
environmental organizations, making it virtually impossible for natural resource companies
to operate in the State. In the late 1990's metals prices again collapsed and the majors,
due to severe cash flow problems, had to drastically cut all costs to survive. Exploration
and mine expansions ceased and land and mine claims were abandoned worldwide. ...
When Phelps Dodge dropped its claim holdings in the 23 sq. mile Ruby Project
in 1998 due to economic hardship and Montana's aversion to mining, the entire area, for
the first time since the 1960's, was totally free of majors and open for claiming.
It was at this time that O.T. Mining's management, James Hess, founder and President,
and his partner, Rosemary L. Christensen, founder and Secretary-Treasurer, quickly
expanded the O.T.'S property rights from a mere 450 acres to over 8 square miles. In
fact, just recently, the O.T. management team has once again seized the day, more than
doubling the size of their property to 21.3 square miles
Metalline Mining (MMGG) for the long term
Zinc Supply Gap
Following several decades of ample zinc supply, a major supply gap is developing in the zinc markets that will likely have a profound impact on future zinc exploration and mine development. ...
Valuation Based on Zinc Alone
With nearly 5 billion tons of zinc, a $0.60 margin would mean nearly $3 billion of gross profits for Metalline Mining. Even if the initial costs are in the $400 million range for the mine and extraction plant and you discount heavily for the approx. 3-year wait to get into production and the profits coming over 10-12 years, MMGG is still extremely undervalued at its current market cap under $30 million.
Metalline Mining Silver/Copper
In addition to the zinc reserve currently in the feasibility stage, Metalline Mining also has high-grade silver and copper mineralization on the North side of its Sierra Mojada property. ...
If the results continue to be good, the silver/copper side of MMGG could have as much or more potential than the zinc side....
At the current level under $1, MMGG looks like a steal, and anything under $2 also looks like a great value with huge upside for the long term.
(I own all three stocks promoted in this report, and none of the companies has paid me to promote their stocks.)
And just so you know, my gains in the stocks are about 100 times as much money as I get from people buying the "look at my portfolio". I sell something because of the demand. In this business, people want to be able to "subscribe" and get an advantage of what I know over people who just read my free emails. And so, I'm happy to provide that. I also use the money from subscriptions to buy ads... so as more people subscribe, the larger this "monetary ministry" grows, organically, in a market-driven way.
Excerpt from: Bible Verses on how to Manage Money
You must save the excess portion that you get from all your hard work. You must save to become wealthy. Saving means spending less than you earn. It requires self-control, one of the fruits of the Holy Spirit. There is no other way to become wealthy. You must have a storehouse (savings) in order for it to be blessed. Even the ants have a storehouse.
Deuteronomy 28:8 The LORD shall command the blessing upon thee in thy storehouses, and in all that thou settest thine hand unto; and he shall bless thee in the land which the LORD thy God giveth thee.
Proverbs 21:20 Be sensible and store up precious treasures-- don't waste them like a fool.
Proverbs 6:6 You lazy people can learn by watching the ant
7 Which having no guide, overseer, or ruler,
8 Provideth her meat in the summer, and gathereth her food in the harvest.
Proverbs 30: 24 On this earth four things are small but very wise:
25 the ants are a people not strong, yet they prepare their meat in the summer;