Keep Calm and Carry On as Silver Coin Sales Soar!

Sean Brodrick

When I was walking the rows and corridors of the Prospectors and Developers’ Association of Canada (PDAC) in Toronto this week, I kept thinking of the phrase from the London Blitz, “Keep Calm and Carry On.”

That’s because many developers and explorers I talked to were feeling the strain of sagging stock prices.

Plenty of junior miners I checked had money in the till — at least, enough to last them for a year or two. But because investor sentiment has been extraordinarily bearish, deals that might have been available six months or a year ago are no longer on the table.

But just because big-money investors are bearish on these companies, doesn’t mean individual investors are entirely bearish on the metals themselves. In fact, if you’ve bought one particular form of bullion this year, you’ve been a part of history-making sales …

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First, the Bad News

Earlier this week, Stockhouse.ca noted that 4% of all junior resource companies are trading below the value of their cash on hand. Here are some examples …

Now, keep in mind that this is not a list of precious metals stocks to buy right now. Things that are cheap can get even-cheaper.

Still, it’s stunning to me that so many companies are being valued at less than the cash they have in the bank.

Now for the Bullish News

You know who’s NOT bearish? Mom-and-pop investors.

There were plenty of them at the PDAC, and it sure seemed to me that they were looking for deals.

And small investors aren’t just looking for bargains on mining shares. They’re snapping up gold and silver coins that they see as cheap, cheap, CHEAP!

According to the U.S. Mint, sales of both the American Eagle gold and silver bullion coins soared in February.

The mint sold 80,500 American Eagle gold bullion coins in February — up from 21,000 a year earlier.

Total 2013 sales of the American Eagle gold bullion coin through February are up 56% over the comparable period for last year.

Meanwhile, the mint sold nearly 3.4 million American Eagle silver bullion coins in February — up a whopping 126% from a year earlier. The reason that’s not a record is because this January’s Silver Eagle sales were enormous — a staggering 7.5 million coins!

Year-to-date, Silver Eagle coins are up 43%!

On Jan. 7, 2013, the U.S. Mint sold almost 4 million Silver Eagles. With 11.7 million sold year-to-date, sales are already 1/3 of the way to 2012’s 33.7 million total!

Sure, coin sales aren’t a reflection of the whole industry. But consider the fact that the U.S. Mint sold nearly 4 million of the one-ounce 99.9% silver coins on Jan. 7 alone. This was more than the entire total from any month between 1986 and 2009.

But it’s a bullish piece of what many are seeing as a bearish picture. Maybe this puzzle has a lot of people fooled — some of the heavy-hitters may be turning bearish at just the wrong time.

There’s plenty of selling going on. But with many mining stocks priced at bargain-bin prices, while broader-market stocks are soaring to overbought levels, we could be looking at a buying opportunity — the likes of which we haven’t seen in a long, long time … and may not see again.

Striking it Rich With Silver

Eagles have been long associated with silver – at least since 1986 when the U.S. Mint started selling them.

But have you ever wondered where the phrase “silver fox” comes from? Or, for that matter, how silver rose to prominence as a precious metal in the first place?

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Yesterday we talked about the beginning of Canada’s great gold rush. That was when the gold miners struck it rich, went home busted, or both. The silver story I’m about to tell you about begins after the fabled gold rush in the Cariboo we just discussed.

It All Started With a Fox …

There’s some dispute about what happened next. But one fact everyone can agree on is that Canada’s big silver deposits weren’t discovered until 1903.

That’s when Fred LaRose, a blacksmith working at his forge in the far reaches of Northern Ontario, was being continually bothered by a fox.

Foxes aren’t rare in that part of Canada — they’re about as common as weasels, but with big fluffy tails and better publicists. Usually, though, foxes are smart enough to stay away from people.

For Fred, this darned fox kept coming close — too close.

Fred’s short temper flared hotter than the iron he was working. Now he could see the fox’s beady eyes staring at him from a bush. So he turned and hurled his hammer at the critter.

He missed the fox and went to retrieve his hammer. Behind the bushes, he found his hammer, all right. But he also found a glittering vein of ore thrusting right through the surface of the rock.

‘Some Kind of Metal’

Fred didn’t know it was silver at first. He showed a sample to the owner of the Matabanick Hotel in Haileybury, telling him that the rock seemed to contain “some kind of damned metal.”

The hotel owner then showed the rock to T.W. Gibson, the director of Canada’s Bureau of Mines. Gibson’s conclusion: The rock contained niccolite (nickel-rich ore).

The expert, as we eventually learned, was wrong!

Still, by 1903, nickel was worth something. So, Gibson forwarded the sample to Ontario’s official geologist, Willet Green Miller, who passed it along to Ontario’s assayer, A.G. Burrows. Burrows looked at the rock and pronounced it silver.

Miller trucked on out to Fred’s camp, saw that there were indeed big veins of ore and chunks of metal, just lying scattered around! It was promising enough that he came back with two assistants to do a full geological survey.

Cobalt Station

Miller wrote in his report of “pieces of native silver as big as stove lids or cannon balls lying on the ground, as well as cobalt bloom and niccolite.”

The cobalt captured his fancy. So, near the ore deposit, by the railroad line on the shore of Long Lake, he set up a sign reading: “Cobalt Station.”

And that’s how Canada’s silver town became known as Cobalt Station. Where the miner’s pick-axe struck, Cobalt Station sprang into existence out of the wilderness.

But let’s not forget Fred LaRose, the hot-tempered blacksmith.

He staked out his LaRose Mine and sold half of it to investors led by two brothers, Noah and Henry Timmins, who became big names in Canadian silver.

LaRose sold half his stake for $3,500, a large sum in 1903. A lawyer managed to snag another 20%. Finally, the Timmins boys bought the rest of LaRose’s stake for $25,000, an even-larger sum.

But the brothers got a bargain. The LaRose mine went on to produce over 25 million ounces of silver.

The Hammer Toss That Launched a Hundred Mines

Modern-day mining — here I am at a silver mine with a slab of the shiny metal.

Others arrived to make their fortunes. A man named Tom Hebert discovered what later became the Nipissing Mine. More than half a million dollars’ worth of silver was dug out of a single vein.

Another man, William G. Trethewey, arrived all the way from Cornwall, in Britain. On his second day in the area, he found a rich deposit that became the Trethewey Mine.

He staked his claim, then moved a short distance away and found what would become another mine, the Coniagas. The silver pulled from that mine was described as “consisting of slabs of native metal stripped off the walls of the vein like boards from a barn.”

Most prospectors spend their entire lives without finding a single worthwhile mine. Trethewey found two of the richest silver mines in Canada’s history in one week.

On and on they came. LaRose’s hammer toss launched a hundred mines. Most ran out quickly, but by the end of 1905, there were 15 mines in operation.

In the first 60 years of their active life, the mines of the Cobalt camp shipped a total of nearly 1.2 million tons of rich silver ore and concentrates.

The total production exceeded 420.5 million ounces of pure silver. At today’s prices, that’s over $33.6 billion worth of the precious metal.

As always seems to happen, the boom was followed by a bust. And in the end, the only thing Cobalt Station was rich in was history.

Lessons Never

To Be Forgotten

Lesson #1. Don’t underestimate the potential value of a great discovery, no matter how accidental it may be.

For example, one of the silver companies I’m looking at right now wasn’t even on my list during my most recent trip to Canada. But the story was so compelling, I can’t just leave it where I found it. I’ll be sharing it with my subscribers shortly.

Lesson #2. Don’t always believe the so-called “experts.”

Most of the big-money investors have been consistently wrong about silver for the past few years. They were equally wrong about gold, base metals and crude.

As we talked about earlier, these guys are bearish on the miners and either selling hard or keeping their cash for other investments. Yet with individuals loading up on Gold and especially Silver Eagle coins, which group do YOU think will be better-prepared when prices start to soar again?

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Lesson #3. Don’t expect every prospect to turn into a winner.

Sometimes, stories are too good to be true. When a guy tells me he has a prospect north of the Arctic Circle, that he’s finding diamonds as big as his fist, that he’s got gold nuggets the size of his head, and all he needs is $10 million to develop it properly, I smile, nod and cross him off my list. Those are the easy ones to discard.

Other times, it’s not so easy to spot the losers. Management may be sharp. They may even have plenty of money in the bank. But something goes wrong. Why? Because management has no track record … or the numbers in their financial statements just don’t add up … or Wall Street decides to sell and it takes down not just a single stock, but stocks throughout the entire industry.

Lesson #4. Avoid the easy-come-easy-go syndrome.

Too many people who get rich quick get poor again quicker, like we saw with John “Cariboo” Cameron. That’s why it’s smart to take some money off the table when positions run up quickly.

Bulls and bears make money. Chickens can too. It’s the pigs that get slaughtered.

And if you want to be smart as a fox, staying hot on the trail of silver and other precious metals — and the companies that bring it to market — is a pretty good way to go!

In fact, there’s one silver miner that is outshining the rest. At this very moment, I’m putting the finishing touches on a brand-new alert for my Global Resource Hunter subscribers, where I’m recommending taking gains and adding new trades.

You don’t have to miss out. Take my Global Resource Hunter service for a test-drive today at an incredibly discounted rate and you’ll be among the first to get my detailed, actionable trade alerts!

Good luck and good trades,

Sean

Your thoughts on “Keep Calm and Carry On as Silver Coin Sales Soar!”

  1. could you please check if I have subscribed to larry edelson’s serice? I do not receive his weekly blogs any longer
    thanks
    Alan

Comments are closed.

Sean travels far and wide to seek out small-cap values in the natural resource sector. His journey started in New England. As a youth he worked on Mt. Washington, on the cog railroad that runs to the summit.