Buy on the Dips--Such as Now
Silver Stock Report
by Jason Hommel, July 22, 2006
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The Commodity Bull is far from dead.
On May 11th, silver and gold hit highs, and began to dip, along with copper and other commodities, and many traders thought that was the end of the commodity bull market. Many traders are now distracted by their summer vacations, and are not taking any note that copper and zinc are back up again.
Uranium and molybdenum never dipped. And neither one is traded in the futures markets.
Uranium is at $45.50/lb., and molybdenum stands at $26.25/lb.
And oil has since hit new highs, hitting above $76/barrel.
Both uranium and molybdenum may help with the energy crisis.
Uranium, obviously, fuels nuclear plants, but how can molybdenum help?
Look up the words "molybdenum coal liquefaction" at google.com. Coal can be turned into diesel through a process called liquefaction, and molybdenum is a catalyst that can be used in the process. Liquefaction is a tried and tested technology older than nuclear power, that's been used since before World War II, and the world has about 300 years of coal reserves.
Idaho General Mines (IGMI.OB) has the biggest molybdenum deposit in the world, and for open pit moly projects, IGMI also has the highest grade, and lowest cost. This is an unbeatable one-two punch. Since January 2006, I've had plenty of time to examine many other moly projects, and quite simply none come close. There are other, higher grade projects; but they are tiny in scope, perhaps 1/100th or 1/1000th the overall size.
When in production, IGMI's Mt. Hope project in Nevada will produce about 10% of the world's molybdenum supply, about 35 million pounds per year. At $26/lb., with $3/lb. costs, that a projected profit of $805 million/year!
Idaho General Mines has about 50 million shares fully diluted. At $2.63/share, it's absurdly cheap, with a market cap of about $131 million. IGMI recently raised $30 million in the spring, which is more than enough to take them through permitting. IGMI still needs to raise about $415 million, but after permitting, that will likely take place at around $10/share, and help the company stock rise to about $50/share!
Meanwhile, copper took a dip from $4/lb., down to $3/lb., but recently climbed back up to $3.75, and now is back to $3.50. Copper is far from dead, although the volatility may be killing many leveraged traders! Avoid the leverage of the futures contracts, invest in mining and exploration for leverage, instead.
My top two copper stocks that I own are both in Montana.
The first, O.T. Mining (OTMN.PK) is exploring the outline of a copper porphyry 14 miles north of Butte, which was the 4th largest most productive copper porphyry mine in the world, the "richest hill on earth". O.T. Mining once had a theory that they were sitting on a copper porphyry that did not come to the surface, that they could detect with Mobil Metal Ions technology. They were correct, and hit the porphyry in their first drill hole, which was a "blind" discovery, since there was no surface exposure. Typically, such a success takes about 150 drill holes! They have not yet hit economic mineralization, but at present, that's not the point. Their porphyry appears as if it may be bigger than Butte, and they are in the process of outlining the porphyry using the MMI (now proven) technology, on 21 square miles of property. The market cap, with about 13 million shares fully diluted, at $2.85/share, is $37 million.
(Exploration is under way.)
My other copper stock, Coronado Resources, (CRD.V, CRDAF.PK) has a property about 35 miles south of Butte, that recently hit 19% copper over 64 feet, including 41% copper over 27 feet. Later, on Feb. 15th, they announced 41% copper over 27 feet, and within that, 60% copper over 13.5 feet. Those are definitely minable widths! 40% copper is 881 pounds/tonne, which, at $3.65/lb., is worth $3,200/tonne!
Also, with about 13 million shares fully diluted, at $2.56/share Cdn x .88 = $2.25 U.S.
$29 million market cap. (Exploration is under way.)
Zinc prices have also shown remarkable strength, having nearly recovered to just under new highs, just as copper did. Zinc topped in May at $1.71/lb., and recently moved above $1.60/lb. again!
My favorite zinc stock, Metalline Mining, (MMGG.OB) has 5 billion pounds of zinc resources, and is currently working on feasibility, having recently raised $11 million to complete it. Aiming to produce just under 400 million pounds of zinc at a cost of about $.25/lb. with zinc prices at $1.50/lb price will lead to annual profits of about $500 million, or more if zinc continues to move up in price. With 50 million shares fully diluted, and a share price of $2.78/share, that's a market cap of $139 million.
These companies have all about had their share prices cut in half, and yet, the commodity bull is far from dead, and commodity prices are about to break out to new highs.
Mining investors get scared gold and silver take a dip; that's just how they are. Moly prices never dipped, yet IGMI is on sale from a 52 week high of $4.15 down to $2.65!
OTMN is on a sale from a high of $7 down to $2.85.
CRD is on sale from a high of $4/share down to $2.56.
MMGG is on a sale from a high of $5.67 down to $2.78.
Finally, let me briefly discuss the “silver value” of these stocks. IGMI has no silver, but it was started as a silver/zinc exploration property, when Exxon Mobile discovered the moly porphyry, which was eventually proved up.
OTMN & CRD are both near Butte, which produced as much as 900 million ounces of silver, which is nearly as much as Couer d’Alene, Idaho! OTMN and CRD both are exploring near former high-grade gold and silver mines. OTMN will be drilling their gold/silver anomaly this summer.
MMGG has historic high-grade silver that was over 30 ounces per tonne, which was shipped directly to the smelter. MMGG recently drilled their silver, and they also have a copper project which may be as big as their zinc resources.
Many traders take a break during the summer. The wealthy take month long vacations, or longer, and many geologists and company presidents leave the office where they might otherwise do some trading; and instead, they are out in the field, exploring, prospecting, drilling. I have been visiting the South Yuba River about 3 times a week for a few hours, because it is about 10 miles from my house in Penn Valley, CA. A month ago, the water from the snowmelt runoff was too cold, and the water too high. This month, the water is crystal clear, and about 65 to 70 degrees, which is just perfect on hot days of 100 degree weather. A month from now, the water will be cloudy and hot, and no fun. I have to take advantage of the river while it's good.
And now is also the time to take advantage of the fact that so many other traders are distracted by their vacations. Buy the dips; especially now that commodity prices are moving up again, and nobody else seems to notice.
I own stock in IGMI.OB, OTMN.PK, CRD.V and MMGG.OB, and no company has paid me to send out this email.
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