Gold Stock Bull

If you are invested in gold, silver and the companies that mine these metals, you might be a bit disappointed by the relative lack of action over the past year. Indeed, if you would have bought the HUI exactly one year ago, you would up a whopping 4% as of the publishing date of this article (April 5, 2007). And if you would have bought 11 months ago (in May), you would actually be down 11%. The HUI has been trading up and down, but has been confined to an ever tightening range. Take heart, as this extended bout of sideways trading must be looked at with some perspective.

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Tagish Lake is best known for being the landing point of a large meteorite that struck at around 9:48 on the morning of January 18, 2000. Scientists have named the meteorite after Tagish Lake. The 150-ton space rock plunged into the earth’s atmosphere at the speed of a fast highway car (67 miles per hour). At 5 meters (or 15 feet) across, the rocky core triggered Department of Defense satellite sensors to record its fiery explosion near Tagish Lake. The meteor had finally exploded with the energy of two to three kilotons of TNT.

Fascinating stuff, but we like Tagish Lake for another reason: massive gold and silver deposits. Read the rest of this entry »

Silver Wheaton is the only mining company with 100% of its revenue from the sale of silver. Let’s use the term “mining company” lightly. Silver Wheaton does not actually own or operate any mines. Instead, they sign deals with established mining companies where silver is produced as a by-product (of base metal or gold mining) and is not properly valued by the market. Where silver is not the core product of a miner, it is often valued at far less than it is worth. Silver Wheaton pays a lump sum for future production plus an on-going fixed amount per ounce and assumes none of the political or production risk. The supplying mine likes this arrangement because it provides up-front cash to be used for expanding production of its core metal. This business model creates strong upside potential with limited downside risk for Silver Wheaton shareholders. With only 5 employees, they are more aptly described as a royalty company than a mining company.

Silver Wheaton was the brainchild of Ian Telfer, who hurriedly spun the company off from Wheaton River Minerals when Coeur D’Alene Mines made a hostile bid. About 62% of the company’s outstanding shares are now owned by Goldcorp. Mr. Ian Telfer, President and Chief Executive Officer of Goldcorp, stepped down in his role as a director of Silver Wheaton in April and appointed long-time associate, Peter Barnes. Mr. Barnes brings more than 20 years of senior management experience to the role and, in his previous mandate as Executive Vice President and Chief Financial Officer of Goldcorp Inc. (and, formerly, Wheaton River Minerals Ltd.), helped build one of the best performing precious metal mining companies in the world. The relationship between Silver Wheaton and Goldcorp seems to benefit both companies, but I think Silver Wheaton will reap the greatest rewards. Jim Damberger labeled Silver Wheaton as Goldcorp’s in-house bank and goes into detail about how this arrangement benefits SLW in a great piecehe wrote for SilverSeek. The bottom line is that Telfer is a step ahead of his peers and after demonstrating his acumen with Wheaton River Minerals, we are happy to be on board with his latest endeavor.

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