Silver Stock Report
by Jason Hommel, May 9, 2007
Zinc stocks started soaring, exploding in price this week, starting last Friday, with Apex Silver, up 20%, and others also up 15-20% in the past 5 days. As each stock soared, the stocks had huge volumes, suggesting a powerfully wealthy buyer. The stocks moved up on different days, suggesting a single large fund buying, as if one man was making the decision to buy. The stocks were up nearly the same amount, again suggesting a single buyer. I do not know who this was, nor have I been able to find out.
Look at the past 5 day’s performance of the following zinc stocks:
SIL – Apex Silver (zinc & silver)
CZN.TO – Canadian Zinc (zinc & silver)
MMG – Metalline Mining (zinc & silver)
PAX.V – Pacifica Resources (zinc only)
(Scroll down the page)
Why is there a sudden rush to buy zinc stocks? Probably because zinc prices are rising as zinc inventories are falling, which started about last month.
I note that zinc inventories are as low as they were in December, and falling even faster, yet prices are lower. Therefore, zinc prices could head much higher, very quickly, unless something changes.
Similarly, copper prices started rising, and copper inventories started falling, about 3 months ago.
I am expecting that both copper and zinc will soon break out to new highs.
Zinc should rise above the former high of $2.10/lb, and copper should rise above $4.00/lb.
How high each can go, is just about anyone’s guess, but I would not be surprised to see gains of at least about 50-100% higher than the former highs, suggesting $3-4 for zinc, and $6-8 for copper, just for starters. Further gains would be from inflation, which I also expect.
Now is probably not the time to be timid, but to buy silver and zinc stocks aggressively, before zinc inventories drop further, and before the base metals rise further, to re-establish the long term trends, which are massively up.
A bullion dealer friend asked me, “How do you know it’s not the time to get out, and sell everything?” Good question.
1. Because zinc shortages are expected to last at least another year, and get worse over the next ten years.
2. Because copper is being imported again by China, which stopped buying for 8 months on the world market, which is the most likely cause of the recent dip in the copper prices.
3. Because most of the zinc/copper companies I’ve been following have still hardly moved up given the rise in the metals prices.
4. Because the average zinc/copper stock with a near term production project has a forward P/E ratio of less than 1. If it was more than ten, that would be the first sign of a mania, and a sign of a top.
5. Because most of the managements of most of the companies are timid about the rising prices, and are using trailing price averages with much lower prices than current prices.
6. Because this is my “job,” to pay attention to all of this, full time. I “show up”.
7. Because this information is still rather hard to come by, and not covered by enough mainstream journalists.
8. Because most mainstream journalists, if they even acknowledge the commodity boom, warn about how risky it is, and wonder whether the boom is over.
9. Because none of those who warn you to “stay away” were ever there to advise you to “get in” at the bottom.
10. Because the industry advisors who said to “get in” at the bottom, are still here, showing the great values in the industry.
11. Because very few of the 100’s of projects that I’ve been following have yet come to production, and even if the majority of them go to production, it will not be enough to satisfy the demand.
12. Because there are shortages industry-wide, from not enough drillers, or assay labs, or geologists, or engineers, and because miners world wide continue to go on strike to protest their wages not keeping pace with skyrocketing base metals prices.
13. Because with declining LME stockpiles, it is almost as if capital itself has also gone on strike.
14. Because too few dollars are being spent on stockpiling physical inventories of depleting base metals.
15. Because too few dollars are being spent on mining stocks, which need to raise $100’s of millions of dollars, and many tens or hundreds of billions collectively, to put their mines into production.
16. Because too many dollars are still short the commodities in futures markets, and because too many dollars are invested in futures contracts on commodity markets, instead of being invested in mining. Because paper contract betting, at best, creates “paper gains” and does not generate new physical, base metal production.
17. Because too many dollars are being spent on acquisitions and mergers, and not on new projects. Because mergers create “paper gains” and do not generate new physical, base metal production.
18. Because commodity booms end when there is too much physical base metal production.
Why am I so enamored with base metals stocks? Because a funny thing happened in 2003. In the spring/summer of 2003, gold prices took off, and silver prices were sure to follow. Gold stocks had already run up, but silver stocks were still depressed, or unknown. As silver prices rose, the silver stocks soared, right on cue. So, I made gains of 300% in 6 months in silver stocks, buying silver stocks when silver was still at rock bottom.
Today, base metals prices have taken off. But base metals stocks are still mostly depressed. If you pay attention to “cause and effect” it seems basic to me that these stocks will, and must, soar in price to match, or exceed the gains in base metals that have already been reached, and the gains to come.
For those of you already positioned, hang tight, or keep researching for more and better stocks in the sector. Don’t sell too soon. Get ready for 100% gains, or more, in the next 6-12 months.
As base metal stocks soar in response to rising base metals prices, take some profits, and buy physical silver. It will also soar in price to keep up with the other metals, and eventually surpass all base metal gains. Although I recently wrote, Why Silver’s Ready to Double in a YearMarch 24, 2007. Please see the full silver story in the articles here, from the archive:
I’m Positive we’ll Prosper with Silver November 4, 2006
Speech given at the Silver Summit September 26, 2006
Why Silver Prices Must Rise May 6, 2006
I own Canadian Zinc, Metalline Mining, and Pacifica Resources, mentioned above, but not Apex. I also own the copper stocks, Baja Mining, and Coronado.
Pacifica Resources, Zinc (PAX.V, PCFRF.PK) http://www.pacifica-resources.com/
Baja Mining, Copper, Cobalt, & Zinc: (BAJ.TO, BAJFF.PK) http://www.bajamining.com/
Recent article: Surviving Inflation with a copper stock with a P/E of 0.3! May 3, 2007
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