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The Vancouver Resource Investment Conference I attended last week was a treasure-trove of undiscovered stocks. What’s more, the pullback in the broad markets is turning these already-undervalued stocks into screaming bargains right now.
Could they go even lower? Sure. But there’s no way they can stay down forever, and when investors regain their confidence in the global economy, these stocks should take off like a silo of missiles.
So today, I want to tell you about a few of the gems I investigated in Vancouver …
Stock #1: Silver South of the Border
Last week, I told my Red-Hot Canadian Small-Caps subscribers to pick up more shares of one of my favorite silver stocks — a Canadian miner that works in Mexico.
While in Vancouver, I had a meeting with a couple of people from the company, including the CEO. Man, talk about a happy guy!
And he should be! The company got over a rough patch earlier this year and is now shifting its silver and gold production into overdrive.
Silver production in the fourth quarter jumped over 70% from the year-earlier quarter, while gold production is up over 300%!
This is a company that’s making ALL the right moves.
I think it will ride a surge in silver prices as inflation ramps ups, due to strong global demand and governments in the U.S. and Europe throwing money at financial problems.
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| This Mexican miner saw silver production jump 70% and gold production surge 300%! |
Also, Mexican miners seem better able to control labor costs than miners in some other parts of the world. Rising prices and controlled costs are a recipe for success in my book.
Stock #2: Show Me the Gold!
The Vancouver Resource Investment Conference attracts explorers and producers from all over the world. And some of them have stories that are just amazing.
One Aussie gold explorer I’m looking at paid less than $4 million — plus shares and warrants — for a past-producing mine with 400,000 ounces of known resources.
So it bought those resources for less than three cents on the dollar!
And only a small portion of its property has been explored — the resource could be much larger. But it gets better … The company also got a complete mining camp and a mill worth $24 million. They expect to be producing gold in the third quarter of this year! And you can buy the shares for pennies on the dollar!
Stock #3: A Fistful of Nickel
Nickel may be a “base” metal, but it has the potential for rich returns. So I was happy to find a near-term nickel producer that is trading at just two times its cash flow.
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| How about a nickel producer that could turn pennies into dollars? |
Production will start in mid-2008, and the company will produce 12.5 million pounds of nickel annually. At $10 per pound of nickel, that’s a lot of nickels … and dollars!
Plus, the company should be able to ramp up with feed from surrounding satellite mines.
I think this could be the next great nickel giant in the making … and its shares are trading for pennies!
Stock #4: Lead, zinc … and more!
If you don’t find base metals all that exciting, how about a lead and zinc miner that’s also a gold explorer?
It is in production, has cash flow, and no debt. On top of that, its cash in the bank should QUADRUPLE by the end of the year!
Even better, it’s a gold explorer that has already found 1.5 million ounces, and it’s working hard to increase its resource estimates.
It has plans to spin its gold properties off into another company. That means investors who buy now will get a lead and zinc miner at a huge discount AND get 30% of the new gold explorer thrown in for free!
Stock #5: Dig that Vanadium
Vanadium is an industrial metal that toughens other metals — mixed with steel, aluminum or titanium, you’ll find it in jet engines, axles, gears, superconducting magnets and more.
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| Vanadium prices have been increasing, and I think this miner’s shares will soon follow suit! |
Since 2003, world demand for vanadium and the price of the metal have increased strongly, largely driven by growth in Chinese steel production.
One of the world’s biggest vanadium deposits is in South America. It’s so rich, the people who found the deposits literally tripped over the outcrops, and now they’re digging it out.
Not a lot of geoscience has been done, but the mining company I talked to knows it has a resource of at least 600 million pounds of V205 (that’s Vanadium pentoxide to you and me). That’s worth about $4.5 billion at current prices.
So, given this stock’s market cap of less than $40 million, you can buy this company’s resources for just 0.8 cents on the dollar.
That’s right — less than a penny on the dollar!
The company will have the feasibility study completed by the third quarter and permitting done by the fourth quarter.
How I Chose These Companies,
And How You Can Play Metal Mania
This is just a smattering of the companies I talked to in Vancouver. I saw many more gold and silver miners, as well as molybdenum, diamonds, you name it. Many of them are incredible bargains … gems in the dust bin.
However, I was careful to narrow down my list with some important criteria …
FIRST, I tossed out all the companies that aren’t producers or near-term producers. We want companies that can bring resources to market — fast!
SECOND, I narrowed the field even more by focusing on those companies that picked up their assets for a song, and that have the potential to grow those assets.
THIRD, I looked for the best, most experienced management teams — ones with proven track records of success.
Most of my picks are under-the-radar precious metals stocks, but there are some great base metal and other miners as well … about ten in all. And they’re all prime targets for my Red-Hot Canadian Small-Caps and Red-Hot Global Small-Caps subscribers.
I think individual stocks, like the ones I highlighted today, are the best way to go. That’s especially true of miners that operate outside the U.S. Why? Because mining costs increased 28% on average for gold and silver miners last year, and most of that is due to rising salaries and fuel costs. While we can’t do much about the fuel costs, miners in countries including Mexico and China are better able to cap labor costs.
However, if you want a broad stake in precious metals miners, consider the Market Vectors Gold Miners ETF (GDX). The fund tracks the Amex Gold Miners Index, which contains silver miners as well. It’s a great way to ride strength in the industry.
Hey, gold is trading well above $900 an ounce … and the Fed will probably cut interest rates again today, which should boost inflation and gold prices even higher. Meanwhile, South African gold mines have shut down due to a power crisis. So this is looking like a great time to target precious metals.
You might also consider buying a gold exchange-traded fund such as the streetTRACKS Gold Trust (GLD) or the iShares Comex Gold Trust (IA).
These funds are easier than buying physical bars because you can trade in and out of them as you see fit. You don’t have to store the bars or carry them back and forth to your local gold dealer to buy and sell them.
And if you’re more bullish on the global economy, think about silver — it’s more of an industrial metal than gold, and strength in the global economy could help silver prices catapult higher. The iShares Silver Trust ETF (SLV) is a pure-play on silver.
Just remember to do your due diligence, and be prepared for volatile moves in this wild market.
Good luck and good trades,
Sean
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Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Sean Brodrick, Larry Edelson, Michael Larson, Nilus Mattive, Tony Sagami, and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include John Burke, Amber Dakar, Adam Shafer, Andrea Baumwald, Kristen Adams, Maryellen Murphy, Red Morgan, Jennifer Newman-Amos, Julie Trudeau, and Dinesh Kalera.
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