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Message: junior silver stocks

junior silver stocks

posted on Mar 29, 2008 09:59AM

sso is not the only junior silver company around; there are many others to choose from. endeavour silver, first majestic, genco, impact, fortuna, and excellon, to name a few, have had some success.

those companies all have followed essentially the same business plan. typically they have an address in mexico, and a land package in the sierra madre, one of the most prolific silver producing regions in the world. they raise capital to buy a fully permitted mine that had been closed down due to low silver prices. then, using modern mining techniques, they hope to coax enough silver from the mine to fund their exploration activities.

these junior producers usually produce 2-3 million ounces of silver per year, but that's not where the action is. you don't buy endeavour silver because it produces 2 million ounces of silver a year. but you might buy endeavour silver because it is run by smart people who could make a discovery of significant mineralization on one of their properties.

typically these companies want to expand their production to 5 million ounces in a few years, and to 10 million ounces a few years after that. this is a strong growth profile, and it would be a notable achievement for whichever of those companies manages to achieve it. on the other hand, when silver standard brings pirquitas into production, it will produce almost 11 million ounces a year. with just one operating mine, it will leapfrog over all of those other juniors.

that's not a knock on any of those other companies. i think all of them will have some success or i wouldn't have mentioned them. but that's not a buy recommendation, either. you really need to do the due diligence on juniors because all of them are different. they have different management, deposits, mine lifes, properties, relationships with majors or jv partners, and so on.

if this commodity bull market reaches a mania phase, you will see 10-baggers from companies that have more silver in their names than they have in the ground. but for now, i recommend only investing in companies that actually do have silver in the ground. and silver standard has more silver in the ground than anyone else.

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