The Next Silver Takeout
May 17, 2013
It always seems that it is darkest just before the dawn. I recall well the pain of junior resource owners in mid-2001. The XAU was up 36% over the prior six months but it seemed it would take forever to value to come into the space.
I just went back and reread the very first piece I ever wrote about junior mining stocks from May of 2001. Read it, you will be surprised at how well I captured not only the moment but also what was going to happen over the next decade. We didn’t even start 321gold until two months later, at the time we had a computer online business. It was a good call then and it’s a good call now.
I could change the date on the piece and post the article today and it would be just as timely as it was then. All investors today hate gold, hate silver and consider the penny dreadfuls the spawn of the devil. That’s a really good time to be buying.
I went to Mexico a week or so ago and saw what will be the next silver company to be taken out. It’s named Silver Bull and the name qualifies under the Truth in Advertising statutes. The company reported about 163 million ounces of silver in a 43-101 resource and they have about 159 million shares. So they have just over an ounce of silver per share. Someone who can add is going to take them out. Soon.
And while they report $.35 per ounce of silver, if you take into account the very real 2.4 billion pounds for zinc, the real cost to a buyer is in the $.19 an ounce range. In Mexico they call that, “El Goodo Dealo.”
There will be big news shortly. The giant resource silver deposit is one of the most unusual I have ever seen. The entire deposit is an oxide of silver and zinc rather than the typical sulfide ore I am used to seeing. Silver and zinc are very active metals; they react and form combinations with just about everything so you virtually never find large oxide silver deposits.
The market is waiting for news about metal recovery processes and recovery rates. With that information in hand, it reduces risk. In addition, there will be a PEA released in the next month or so.
Everyone in the resource sector (with perhaps the sole exception of your author) is caught with that deer in the headlight stare right now. But I can assure my readers that neither the Apocalypse nor the 2nd Coming of Christ is scheduled for next week. The market is stumbling around like an old man fumbling in the dark for his dentures but better times come soon.
Silver Bull has young and aggressive management in the form of company President and CEO Tim Barry. He was former VP of Exploration for Metalline Mining, the prior name for SVB. He ousted the welded in place Jurassic age management and kick started the company. He has increased the resource some 250% since 2011 and made it as attractive as possible for a potential buyer.
Coeur D’Alene Mines owns some 10.9% of the shares today. They are a natural buyer or counter bidder should another major take a run at the company. Recent takeouts were in the $1.70 an ounce range so I would expect SBV to attract worth a 300-700% return.
The company is well cashed up with cash in the bank around $10 million so they will have no problems keeping the doors open. Management is young, they are starting to tell their story and for those who like silver, the company is most attractive.
Silver Bull is not an advertiser. Yet. I don’t own shares. Yet. I’m on the road as I write this. But they will be taken out and it will be at a lot higher price. Do your own due diligence.
Silver Bull Resources
SVB-T $.37 (May 17, 2013)
SVBL Amex 159 million shares
Silver Bull website