Silver Stock Report

by Jason Hommel, May 22, 2006

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On May 2, twenty days ago, I sent out a warning on Bolivia's confiscation, and gave warnings on 4 silver companies in Bolivia.

Today, twenty days later, Marketwatch covered the same issues, and gave warnings on the same 4 silver companies in Bolivia.

SIL was about $18/share, and now: $14/share.
APE.V was about $1.20/share, and now: $.80/share.
CDE was about $6.20/share, and now: $4.70/share.
PAAS was about $23/share, and now: $19/share.

Timeliness: it would have paid to have known, and acted, sooner.

On October 27th, 2005, nearly seven months ago, I covered the Silver ETF in detail.

It wasn't until nearly 7 months later, that the Silver ETF was approved, and that most of the stories on the Silver ETF began to come out.

In the May 29th issue of Fortune, on page 188, they have a box with a headline: A Better Way to Play Silver--If You Dare, that features the Silver ETF.  The mixed sentiment of the piece is evident in the last paragraph: 

The advantage of these ETFs is that they give individual investors a convenient and relatively inexpensive way to invest in commodities.  But the fact that it's easy doesn't mean it's smart. "Typically, the time to think about adding something like commodities to your portfolio for diversification purposes is when they're out of favor," says Dan Culloton, a Morningstar analyst who specializes in ETFs.  "And that's not the case right now.  The history of metals is pretty volatile.  If you're thinking of adding somehting like this, you really have to have an extremely long time horizon and an extremely strong stomach."

Fortune is not only late, but they clearly have not done their research, and they interviewed the wrong person.  The Silver ETF is not a product primarily for individual investors, who have been always been able to buy all the silver they can carry.  The Silver ETF is primarily for large funds with billions of dollars to invest, who could not invest in silver before.  And further, the silver market is so tight, and so small, it remains "out of favor" by definition!  It can hardly stand to have $1 billion invested in silver, as we have seen.

Silver was about $8/oz., and now, it's about $12.60/oz.

Timeliness: it would have paid you over 50% to have known, and acted, sooner.

On Jan 28, 2006, nearly 4 months ago, when Zinc prices were $1.04, and when MMGG was at $1.77/share, I wrote an article:
MMGG: Here’s why you will make a fortune on zinc.

Today, May 22, 2006, nearly 4 months later, Zinc prices are at $1.44 (hitting a recent high of $1.70) and MMGG is at $3.74 (hitting a recent high of $5.67).

Timeliness: if you knew, and acted sooner, you could have earned 110% in four months on MMGG from $1.77/share. 

(I own shares of MMGG and have not been paid by the company to write about them.)  MMGG also recently released extremely good high grade silver results.  Look it up.

In 2003-2005, I was continually saying in every single silver stock report:

$290 Billion... at $500 /oz. is a massive demand of 18,039 tonnes Do you understand what that means?  That means that far, far less than 1% of dollars, in either bonds or M3 can buy gold, because there simply is not that much gold available. 

Long before 1% of U.S. paper dollars tries to buy gold, gold will be going up well over $1000/oz., and silver will be headed up over $50/oz.

Gold is now around $700/oz., and not nearly 1% of U.S. dollars has bought gold and silver.

Today, Official China news continues to urge China to put 3-5% of their $875 billion dollar reserves, or about $45 billion dollars, into gold.

A key point is that China may buy nearly as much gold as world annual production, 2500 tonnes!  That means gold prices are going much higher.  It will pay you to know this now, and it would have paid China to have acted sooner. 

For the sake of doing the math, 1900 tonnes of gold that China wants to buy, x 32,151oz./tonne = 61 million ounces x $700/oz. = $42.7 billion dollars, which is now 4.8% (not 3%) of China's foreign exchange reserves.  You see, certain Chinese officials have been urging China to buy about 1900 tonnes of gold for so long now, and gold has risen so quickly, that the math has changed.  That much gold, 2500 tonnes, would be not 3-5% of their foreign currency reserves, but actually 6.4% of reserves.  And isn't that the point of making an investment, that it outperforms others in your portfolio, to become worth more?  My guess is that by the time China actually buys 2500 tonnes, that much gold will be worth nearly 10% or more of their foreign currency reserves.

Timeliness.  China's dollar holdings will now buy nearly 30% less gold than they could have bought at $500/oz. 

In Chicago at the Natural Resource conference three weeks ago, astute investors asked a panel of experts what the chances were of a 20-30% "correction" (I hate that word) in the price of base metals.  At the time, copper was $3.25/pound.  I replied that I thought a 30% dip in prices would be a typical fluctuation in a normal bull market, and that you can't really predict precisely when those things will happen.  As it turned out, Copper continued to soar to $4, and has come back down to $3.40, still above the $3.25/lb.!

So, what is timely for today?  Besides China buying gold?

Silver and copper have recently moved up, and went up parabolic.  They have moved up so quickly, so suddenly, that the world has been caught flat footed, and has basically missed the run.  How can there be any large copper investors, when there is no copper in which to invest?  There is only a 2-day world supply of copper?!  Amazing.  Even silver, a basic world monetary asset, is also almost gone, and is still cheap.  The Silver ETF has barely $1 billion worth of silver; which is a miniscule amount of money.

Exploration stocks with silver and copper have barely moved in this recent time period, but they will go up parabolic too, just to catch up to silver and copper.  

Here are three explorers in politically safe Montana, in the united States.  Montana's political climate has recently shifted in favor of mining, and the governor recently issued a statement supporting Mines Management.

Mines Management (MGN) (I own shares and have not been paid by the company to write about them), http://www.minesmanagement.com/ in Montana, is developing and working towards feasibility of a large, low grade, copper/silver underground deposit which may produce up to 11 million ounces of silver per year, and 95 million pounds of copper, for 15 years, for a total of 165 million ounces of silver, and 1,425 pounds of copper.  At $12.50/oz. and $3.50/lb. copper, that's a total value of $2 billion of silver, and $5 billion of copper.  Market cap?  At $7.28/share, $92 million.
Timeliness:  (I first covered MGN when it was $2.55/share, in Silver Stock Report 1 Sep 19, 2003)

O.T. Mining (OTMN.PK) (I own shares and have not been paid by the company to write about them), http://www.otmining.com/ also in Montana, is exploring a large copper porphyry, 14 miles away from the 4th largest copper porphyry on earth, that produced over 700 million ounces of silver.  O.T. has proved that the MMI soil sampling technique worked when they drilled several 2000 ft. continuous intercepts of uneconomic copper, that started 600 feet below surface.  O.T. is now outlining the total surface area, and still exploring for the high grade zone, of what may be one of the largest copper porphyry deposits on earth.  Market cap?  With 12.6 million shares fully diluted, at $5/share, that's a market capitalization of $63 million.
Timeliness:  (I first covered OTMN when it was $1.75/share, in Silver Stock Report 13 Dec 12, 2003)

In late January, back when copper was about $2.25/lb., another, different copper explorer in Montana (I own shares and have not been paid by the company to write about them) announced a drill intercept of 40% copper over 27 feet, which is definitely a mineable width.  About a month later, they announced that within that intercept, was 60% copper, over 13.5 feet!  40% copper, at today's prices, is about $3000/tonne, and is very, very, very high grade ore.  Today, this company is only 17% more expensive than it was back when copper was $2.25/lb.!  With 13 million shares fully diluted, the market cap is $31 million.

The name of this last company is still reserved for paying subscribers, who buy the "look at my portfolio".  After all, they pay for such timely information. 
To subscribe, it's $39.95/month: see the gray/silver box on the right side of the page at:  http://www.silverstockreport.com/customerservice.htm

If you plan to invest more than $1000 in a stock tip such as this, my guess is that it will probably pay you sign up, to get the name as soon as possible.  You can cancel at any time, or get a refund of your prior month's payment if you feel it's not worth it.  $40 on $1000 is only 4%. 

Oh yes, paying subscribers also now have access to a forum for members only.  The forum, in just a few days, has 142 active members, 146 posts, 38 threads, and discussions on about 12 different stocks.

Final Disclaimer:  This email is going out to over 25,000 opt-in subscribers.  I own MMGG, OTMN, MGN, and this other copper stock that reports a 40% copper intercept, and no company has paid me to send out this report.


Jason Hommel