As we write silver is trading at $9.23/oz, gold is trading at $734.40 and the DOW has just dropped 427 points. The financial turmoil continues with the flight to cash alive and well. This very same flight has added strength to the dollar and kept the lid on gold from moving higher and indeed silver. It is difficult to predict the bottom for precious metals and their associated stocks as the contraction of the world economy goes up against the planets biggest ever stimulus package.
A new president, imploding commodities, rising unemployment and volatility would appear to be the order of the day. We decided to suspend our summer buying programme in view of the rapid sell off that hit us with great severity; however, we still hold our silver producing stocks, despite the battering. Many of these stocks are now at bargain prices but our ‘opportunity cash’ remains on the sidelines as we try to ascertain a change in direction or a short-term trading opportunity presents itself. There is no hiding place for this market sector and our portfolio has taken a hammering, we can only hope that better times are around the corner.
Here is a summary of the silver stocks we are currently invested in or following:
Hecla Mining Company (HL) – Initially we bought this stock for $5.27 - a quality silver stock which was going along nicely and then we thought Hecla was overbought, as it hadn’t corrected with other silver stocks, therefore we took profits on Hecla at $11.89, the stock price then dropped so we bought it back at $9.72, getting a 18% discount on our shares. On the 14th April we sold 50% of this stock for $11.79 in order to lock in some profits as we anticipated a fall. On the 18th June 2008 we re-purchased Hecla’s shares for $9.61. We also purchased Call Options on Hecla, which are detailed in the Traders Corner section below. Hecla closed yesterday at $1.25, a very disappointing performance indeed.
Pan American Silver Corporation (PAAS) – Initially we bought this stock for $18.00 and on the 23rd August we gave another BUY signal on PAAS when we said “We made a further purchase today at $24.10” giving us an average purchase price of $21.50. On January 31st, 2008 we sold about 50% of our shares for an average price of $36.65, locking in a profit of around 70.32%. On the 18th June 2008 we re-purchased PAAS shares for $31.06 and on 16 July 2008 we made another purchase at $36.53. They closed yesterday at $9.96, again another disappointment.
Silver Wheaton Corp (SLW) – Originally bought for $9.41 and made another purchase on 15 July 2008 at $15.61 and a further purchase on 6 August 2008 at $11.43. SLW closed yesterday at $2.85.
Silver Standard Resources Incorporated (SSRI) Initially we bought this stock for $19.98 and on the 20th August we gave another BUY signal when we wrote “we think Silver Standard is at a good level to buy at the moment and we bought today at $28.99” giving us an average purchase price of $24.48. On January 31st, 2008 we reduced our exposure by selling around 50% of SSRI for an average price of $34.82 locking in a profit of 42.22%. SSRI closed yesterday at $7.99.
Eagle Plains Resources Limited (EPL) – We bought this stock for around $0.53, it closed on Friday at $0.08, a very disappointing performance by this stock. We will continue to hold for now and keep a close eye on it.
Endeavour Silver Corp (EXK) – We initially bought Endeavour for $3.97 and on 7th December 2007 we bought more shares saying; “EXK is down from over $5.50 and as it has been beaten down so much we are signalling a BUY again on this stock and recently we bought for an average price of $4.10 per share and doubled our position.” we secured EXK for $3.26 on the 2nd April 2008. This purchase being the largest we have ever made in EXK. Yesterday EXK closed at $1.02. Endeavours results are encouraging and the news flow is positive so we will continue to hold tight.
Minco Silver Corp (MSV) - Bought for $2.80 as a speculative move, yesterday it closed at $0.40, which is new low point during this sell off. Again we will continue to hold and hope for some signs of a recovery with this stock.
Traders Corner:
We have purchased Call Options on Hecla Mining Limited, they are the JAN09 series with a strike price of $10.00 and we paid $1.00 for these contracts, which are now worthless. We have placed a sell order on these contracts at $2.00 even though they have got off to a bad start. They don’t expire until January but they are pretty much dead in the water. Options are very volatile so be prepared to experience wild swings in either direction.
We continue to look for short term trades on silver and silver stocks as we have done in the past. However, the next up leg could happen just as quickly as the latest sell off landed on us. We are in observation mood and will try and remain patient during this world full of financial turmoil, the outcome of which we expect to be the continuing demise of the dollar and an ever-increasing recognition of both silver and gold as the only place to be.
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