Buy Silver At A 71% Discount!
The Dynamic Wealth Report
November 2, 2009
I know a lot of our readers closely follow the commodity markets. The
one commodity I get asked about most is Gold. Ultimately, everyone wants
to know where Gold is heading… or how high it can go.
The questions have only accelerated since Gold crossed the
psychologically important $1,000 level.
There is one primary reason gold is moving higher right now… fear of
inflation.
Investors are flocking to hard assets. They’re trying to protect their
portfolios from the ravages of inflation. Don’t think inflation is
anything to worry about? Just look at the value of the US Dollar… it’s
hitting all new lows. And look at gasoline prices… we’re back above
$2.70 a gallon.
If those aren’t early signs of inflation, I don’t know what are.
While Gold prices are skyrocketing, I made an interesting observation…
Many investors are ignoring Gold’s little brother – Silver. Like Gold,
Silver is driven higher by inflation. But, Silver has something else
going for it too.
It’s also used as an industrial metal.
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Silver has a surprising number of uses. Everything from medical devices
to electronics to photography and even batteries use Silver! Toss in the
huge amounts of Silver being turned into coins, and you see demand
building.
With the economy finally recovering… watch out, we could see a huge
spike in demand for Silver. And you know what that means, higher Silver
prices ahead.
What’s a good way to profit from rising Silver prices?
I think one of the best ways is by investing in Silver exploration and
mining companies.
As the price of Silver moves higher, these companies are able to profit
two different ways. One way is from increasing asset values. The other
is from cash flow thrown off from the mines.
There are hundreds of small players in this industry, but one that
recently caught my eye is Minefinders (MFN). They’re an exploration and
development company as well as a mining company. I’ve got two big
reasons why I like the company.
First, they just started commercial production on a Silver mine in
Mexico.
The Dolores Mine in Mexico started commercial production in May of 2009. Production is expected to steadily increase
which means precious
metals production is set to build over time. That means every quarter
should show marked improvement in their financial statements.
But that’s not the only reason to own this company.
The second reason I like this company is the valuation.
I think the company’s undervalued by the market. Just look at their
proven and probable reserves. As of September 2009, the company reported
“proven and probable reserves” of 126.6 million ounces of Silver.
Given today’s market price of silver - $16.65 an oz. - the company’s sitting
on Silver deposits worth roughly $2.1 billion dollars!
The enterprise value of the entire company is only $600 million.
Buying this company is like scooping up Silver for only $4.74 an oz. You
can buy all the Silver you want at a 71% discount!
Here’s the best part… those numbers don’t include the 2.4 million
ounces of Gold they could dig up. Minefinders reports “proven and
probable” Gold reserves of 2.44 million ounces… at $1,000 an oz, those Gold
reserves alone are worth $2.4 billion!
So here’s a company you can buy for $600 million.
And they have proven and probable reserves of Gold and Silver worth $4.5
billion. That sounds like a big valuation discount to me.
This company looks undervalued, REALLY UNDERVALUED, to me. And if
precious metals prices keep moving higher, I wouldn’t be surprised to
see the price discrepancy build even more. I like Minefinders and I
think it’s an easy way to trade the building price of precious metals.
• Food Industry (Up 8%)
In the last 30 days, the best performing sector is the food
industry. Leading the charge are companies like Kroger (KR) and
Safeway
(SWY), both are up more than 12%.
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