November is coming around the corner and it may be one of the most significant months of 2010.
Not only will the mid-term elections in the US take place, we will also be facing the recent foreclosure scandal hearing on November 16, 2010 (see Get Ready for Another US Scandal).
The combined events alone could spark a very drastic turn in the markets.
Right now, the market is hanging on by a thread. Despite poor economic numbers and conditions, the markets have been soaring based more on gambling rather than investing. If you believe in fundamentals, you`re probably at a loss for words.
But perhaps simple fundamentals no longer have a role these days. Perhaps perception is more important in today’s market than realisation, or reality. Either way, protecting our portfolios while giving them the ability to make massive strides is achievable.
For us, there is no better way to do that than to invest in the junior resource sector. In particular, the precious metals market.
Over the past year, we have discussed the prospects of silver on numerous occassions (see The Breakout, It`s Almost Over, The Retail Advantage, The One Exception, The Human Metal, The Tip of the Iceberg, The Silver Conspiracy) and introduced you to three different silver juniors – each one making substantial gains this year.
Each of the companies featured in our Special Edition Reports has single-handedly beat both the stock market and the gains made by both gold and silver.
Here`s a quick review:
Silvermex Resources (TSX-V: SMR)
Our first silver junior, Silvermex Resource (TSX-V: SMR) has climbed as high as $0.61 CDN since our coverage. Since that time, not only has Silvermex’s share price increased, but their corporate developments have been substantial.
This will not only add to their silver resources, but it will also make them a producer with a management team backed by some of the most important and respected silver mining executives in the industry (former Hecla and Silver Standard Executives.)
We’ll have more on this story as this business combination progresses and once again sit down with management to discuss the ramifications of this merger.
United Mining Group (TSX: UMG) (OTC: UMGZF)
Since that time, they have not only graduated to the TSX, but have almost nearly doubled in share value since the graduation, hitting a high of $1.14 this past Friday. (see Critical Milestone)
But that’s not all.
One of the more important factors in making United Mining Group’s Crescent Mine project a success, and perhaps also a blockage in their goals, was the ability to use an adjacent partner’s tailings dam, which the Crescent Mine did not support.
With the help of newly appointed CEO Charles Pitcher, (former President and CEO of Western Canadian Coal) and Graham Clarke, Jr., (former Senior Vice President and General Counsel with Newmont Mining as Independent Director), the issue of a tailings dam is no longer issue.
United Mining Group has just signed a letter of intent with the New Jersey Mining Company (NJMC) to secure milling capacity for the Company which would not only give them access to a milling capacity of 350 tpd (with some investment), but also give them access to the tailings to use for backfill. (see news release)
With the tailings problem solved and the addition of some very powerful executives, United Mining Group has been aggressive in seeking further resource expansion. They recently signed a letter of intent to increase their land position by 265% in the highly prolific area of Idaho’s silver valley – directly between two of the world’s historically biggest silver producing properties, the Sunshine and Bunker Hill mines (see Special Report Edition: Critical Milestone.)
On Thursday, we attended a presentation given by Charles Pitcher and he expects that United Mining Group will be a significant and profitable producer:
Two years from now, Pitcher predicts, “We’ll certainly be in production on the first module and well on the way on the second. We’re going to be a significant and profitable producer. In three years, I think we’ll be looking north of 300 tonnes a day.”
And we believe him.
At the time he became CEO of Western Canadian Coal, shares of the Company were trading at less than $0.50, and as low as $0.30. Since then, Western Canadian Coal’s share price has surpassed $10 before the market crash in 2008. It still has a market cap of over CDN$2 billion today.
United Mining Group was also able to secure Graham (Chip) Clarke, who has been with Newmont Mining Corporation for 13 years spending 5 years as General Counsel and Senior Vice President. Newmont Mining currently has a market cap of nearly US$30 billion.
It’s no surprise to us that since the addition of both Charles Pitcher and Graham Clarke, the share price of United Mining Group has continued its climb. See chart:
UMG Share Price Chart Since TSX Listing
Minco Silver (TSX: MSV) (OTC: MISVF)
Since our coverage (see Special Report Edition: Brink of Milestone), shares of Minco Silver continue to surpass new 52-week highs – climbing as high as $4 earlier this month.
Minco Silver Chart
Just last month, Minco Silver received conditional commitment of a project debt facility in the amount of RMB 300 million (approximately $45 million USD) for construction of their Fuwan Silver Project.
The debt facility represents approximately 60% of the total projected capital expenditure of US$73.1 million for the Fuwan Silver Mine construction, as outlined by the Bankable Feasibility Study announced on September 28, 2009 (see news release.)
The next stage for Minco Silver in becoming one of the largest pure silver producers in China, is to receive their Environmental Impact Assessment (“EIA”) permit, which has now been advanced to the final stage (see news release.)
Although patience is key in Minco Silver`s developments, shareholders have already been rewarded with substantial gains in the market, with shares climbing from lows of $1.55 earlier in the year, to over $4 this month.
Analysts covering Minco Silver remain confident the EIA permit is on its way and many have continued to raise their target prices over the summer months, with Haywood Securities giving them a 12-month target price of $4.15 (see Analyst Coverage) and Raymond James with a $4.40 OUTPERFORM price target.
“Although the Mining License is taking slightly longer than anticipated, we continue to view shares of Minco Silver as offering investors a compelling buying opportunity given the upcoming milestones including final permitting now likely Oct/Nov (Raymond James estimate), financing followed by start of construction.
We continue to maintain the view that development companies are typically rewarded in the market as they de-risk their projects. We expect the Environmental Impact Assessment to be approved over the next couple of months, which should be followed by receipt of a Mining License.
We continue to recommend investors buy shares ahead of these key announcements – we are maintaining our OUTPERFORM rating and C$4.40 target price.”
– Brad Humphrey, Raymond James
The Future Ahead
The share price performance of our Special Report Edition companies comes as no surprise, as the market for precious metals and the juniors involved have grown dramatically.
The market data continues to give us reason that the world is still on its toes.
The US housing market, which historically has been the revival and escape from past recessions, has only gotten worse:
“Household finances and attitudes also have an important influence on the housing market, which has remained depressed, notwithstanding reduced house prices and record-low mortgage rates. The overhang of foreclosed properties and vacant homes remains a significant drag on house prices and residential investment.` – Ben Bernanke (see Bernanke`s Speech)
The economic state of the world`s most powerful nation remains depressed, despite all efforts made thus far.
That`s why the US government will continue to spend money and do whatever they can to increase inflation back to reality.
As a result, Goldman Sachs now believes gold may rally more that 20 percent from this month’s record to $1,650 an ounce in 12 months, due to further quantitative easing in the United States and the prospect for falling long-term interest rates.
They expect the Federal Reserve to return to quantitative easing with purchases of U.S. Treasury securities of $1 trillion, which should depress U.S. bond yields – and send gold prices even higher:
“The return to quantitative easing will likely be a strong catalyst to drive gold prices higher, and we expect the gold price rally to continue until U.S. monetary policy begins to tighten.“ – Goldman Sachs
With the future continuing to look bright for the precious metals market, many juniors may be on the verge of a breakout.
We are currently exploring other precious metals opportunities to feature in our next Special Report Edition and should be making a decision in the coming weeks.
Until next time,
Managing Director, Equedia Weekly
Equedia Network Corporation
Disclaimer and Disclosure
Equedia.com & Equedia Network Corporation bears no liability for losses and/or damages arising from the use of this newsletter or any third party content provided herein. Equedia.com is an online financial newsletter owned by Equedia Network Corporation. We are focused on researching small-cap and large-cap public companies. Our past performance does not guarantee future results. Information in this report has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. This material is not an offer to sell or a solicitation of an offer to buy any securities or commodities.
Equedia.com has been compensated to perform research on specific companies and therefore information should not be construed as unbiased. Each contract varies in duration, services performed and compensation received. Equedia.com is not responsible for any claims made by any of the mentioned companies or third party content providers. You should independently investigate and fully understand all risks before investing. We are not a registered broker-dealer or financial advisor. Before investing in any securities, you should consult with your financial advisor and a registered broker-dealer. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report OR ON Equedia.com will be the full responsibility of the person authorizing such transaction.