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XMFSinchiruna (27.47)

Sinchi's Top 10 Gold and Silver Stocks for 2011

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December 22, 2010 – Comments (19)

Merry Christmas, Fools!

I spent some time scrutinizing my own holdings in gold and silver in recent weeks, and from among the stocks I personally own I have selected my top 10 in terms of my confidence in forthcoming returns through 2011 and subsequent stages of the gold and silver bull market. 

I have a holiday request: For this one post, let's limit our discussion exclusively to the stocks mentioned in this article. I am as familiar with the stocks in this article as anyone you'll meet, so please use me as a resource if you're conducting research into any of these companies. Many of you may question why some other stocks may not have been chosen, but I prefer to save that discussion for another time. Likewise, since everyone is well aware that I continue to stand by my conservative price projections of $2,000 gold and $50 silver, and likewise that many don't share that expectation, I also request that we leave that discussion aside for this post.

The Top 10 Gold and Silver Stocks for 2011

http://www.fool.com/investing/general/2010/12/22/the-top-10-gold-and-silver-stocks-for-2011.aspx

I believe that each of these companies will see persistent advances alongside projected advances in gold and silver prices. I own all 10, and I will continue to own them.

Thank you for sharing your thoughts on these selections, and please feel free to ask questions about them.

Hoping for another prosperous year for precious metal investors, and likewise for all my fellow Fools.

In appreciation of this great community:

TMFSinchiruna

Christopher

19 Comments – Post Your Own

#1) On December 23, 2010 at 12:07 AM, NOTvuffett (< 20) wrote:

Christopher,

Thank you for your reply to me in the other thread.  

Although I may not be convinced about your price target for silver, I think the argument for silver is strong given the amount used in industrial purposes.  Even if the target is not reached, I can see the potential of a dynamic junior miner like Great Panther.

For TGB, at the moment a copper and moly play. Last price I saw on copper was $4.28/lb.  Like silver it appears it may go higher because of constrained supply.  However, I haven't seen any figures on the projected use/inventories of molybdenum.  That would be interesting to look at.

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#2) On December 23, 2010 at 2:54 AM, djshagggyd (72.73) wrote:

Christopher-

I look forward to following this post. Thank you for sharing your hard work and research.

After emailing with my broker and the SEC I decided to hold onto my shares of MNOCF. I've been paying close attention, and so far it's been tracking "P" on the TSX exactly. It seems each month there is slightly more volume on MNOCF... which (as a beginner) I would take to be a positive sign. 

In your article you mentioned Mr. Conway is reconsidering a U.S. listing. If that were to happen, do you think it would affect my shares of MNOCF somehow?

You also mentioned that you own all ten companies... what method did you end up using to invest in Primero? 

I'm going to read up on the 9 other companies you mentioned too. The only other one I was familiar with was AUY... which I considered purchasing before I discovered Primero.

I will have to get back to you on picking a favorite... I've got a lot of reading to do first! 

~justin 

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#3) On December 23, 2010 at 5:54 AM, dbjella (< 20) wrote:

Are you no longer bullish on SLW?

Or are the 10 listed in your article stronger than SLW? 

 

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#4) On December 23, 2010 at 9:19 AM, XMFSinchiruna (27.47) wrote:

djshagggyd

If Primero moved to a U.S. exchange, I believe you would be issued those shares 1:1 and the pink sheet listing would be terminated. That has happened to me before with unsponsored adr pinks.

I kept watching closely as well, and once the stock dipped below $5 it became easier to forget that the vehicle made me somewhat nervous. :)  I think all will turn out fine, though I still wish they'd fix the tape from that surge to $100 to settle my nerves. You know that means someone actually sold shares at $100 and the trade stood?!?! It baffles me that we invest in a world where the regulatory agency can overlook such an occurrence, but in the age of flash crashes and algorithmic super-computing traders I guess they truly have their hands full.

I also find it baffling that not one person in the financial universe seems capable of answering basic questions like "who issues these unsponsored adr pink sheet listings?", or "what rules exist to ensure that these shares are not leased or otherwise utilized to form the basis for insitutional short positions or other such funny business?". Investors have a right to know, but apparently no one knows.

I will make note4 of one interesting development: Merrill Lynch has instituted a policy whereby its customers are not permitted to hold more than 10% of their portfolio in sub-$1 pink sheet listings, and that company representatives informed me this was because the company feels such issues are vulnerable to manipulative practices. I have no doubt that for years I was swimming against the tide of some very powerful shorts in Great Panther, for example, until that collective short was either removed or busted during silver's recent run.

dbjella

I knew that question was coming. :) Now that my quiet-period has passed, I can point out that we Fool writers must avoid discussing a particular ticker for a period before and after the execution of a trade. I had recently shaved some shares to book profits, but of course my long-term projection for $100 shares of SLW remains unchanged.

SLW remains my largest single holding, though I won't be surprised if my Great Panther stake overtakes it during the coming year. Fool on! 

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#5) On December 23, 2010 at 9:25 AM, mikemariani (44.70) wrote:

FWIW, Louis Navellier just recommended SLW as a buy below $39.

 Thank you, Christopher!

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#6) On December 23, 2010 at 9:50 AM, Jbay76 (< 20) wrote:

Hi Chris,

 

Always happy that you post more info on miners.  Using your posts of the year, I am also holding RBY and Great Panther and have held the intention of doubling down in January for both even before this posting. 

I am interested in Northgate Minerals, 56% institutional  ownership is very welcoming.  I was wondering if you had any insights into the compnay beyond what you have already stated.  I looked at the financial statements on google finance and don't find much in the way of P/E or other metrics and see that the company is in the red.

 

Your help would be very welcoming.  I would also like to ask questions about other compnaies but will refrain due to your original request.

 

Mahalo nui loa! 

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#7) On December 23, 2010 at 10:32 AM, silverminer (31.25) wrote:

Jbay76

I have been excitedly awaiting Northgate's Young Davidson mine for years, and it's finally close to contributing to their bottom line ... and yet the stock gets zero love. To contrast that against another story, consider the way Osisko's shares have performed in anticipation of production from its Malartic project. It's as if Northgate is being punished for having already been an established producer when it hit this minor limbo patch of lower production between the phase-out at Kemess and the start-up at Young Davidson. 

Meanwhile, the Australia operations have excellent potential to improve as well as increase in scope over the years. Recent exploration sucess has been phenomenal, and completely overlooked by the market. Zooming out, I LOVE the company's geographic profile. I love their prospects for repackaging Kemess North as an underground operation.

I REALLY love that $0.40 of that depressed share price is cash net of debt! With Young Davidson's NPV conservatively at $1.50, it really doesn't take much snooping to detect value with 3 existing gold mines in production and the above $1.90/share besides.

I like their jv with Nevada Exploration.

Aloha nui loa!

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#8) On December 23, 2010 at 11:24 AM, Jbay76 (< 20) wrote:

Thanks Chris for the response.  They're re-packaging of the Kemess North project seems tricky, but truly ingenious if they can pull it off.  With the estimated minerals in that are, it seems worth a go.

 With the Kemes South Mine to be closed in the next year or so, what would you say is the fair value of NXG?

Tofa soi' fua 

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#9) On December 23, 2010 at 12:32 PM, silverminer (31.25) wrote:

Jbay76

I haven't recently run an exhaustive value analysis of the stock, but taking the potential of the Australian assets into full acount, and assigning perhaps 1/4 of perceived value from Kemess underground given the regulatory backdrop, I still would have to say these shares could be well justified to trade at $6 - $8 at present metal prices.

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#10) On December 23, 2010 at 1:52 PM, Jbay76 (< 20) wrote:

Thanks for the reply! It does look like a company with good prospects.  Thanks for bringing it to our attention!

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#11) On December 23, 2010 at 2:31 PM, jesusfreakinco (28.86) wrote:

Sinchi,

I noticed you seem to be overweighting gold vs silver miners and am curious as to why...  I see more upside in silver in 2011 and am overweight silver miners relative to gold miners, but am wondering if I am missing something.  Is it just a matter of the gold miners having underperformed the silver miners in 2010 and 2011 is time for the gold miners to outperform silver miners for awhile?

TIA - JFC

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#12) On December 23, 2010 at 2:46 PM, silverminer (31.25) wrote:

I'm still more heavily weighted in silver than gold, but less so than I was to start 2010. I've added to holdings like Gammon, Northgate, and Brigus in recent months because I see great upside in those stocks. Gammon tops the list for a number of reasons, not the least of which is its enormous silver credit. It's basically a silver miner in a gold miner's garb. Also, my recent trading activitiy kept from including a couple of prominent silver producers from the list, a la my above reply to dbjella.

I adjusted the position of great panther on my list to account for the fact that it's a pink sheet, but in my own portfolio, as mentioned, it's my #2 stock after SLW (which had to be omitted from my list due to trading activity). Barring those considerations, you would have seen the list looking a bit moreheavily weighted towards silver.

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#13) On December 23, 2010 at 3:08 PM, leohaas (32.57) wrote:

Christopher,

Thanks very much for this article, and all the work you put into it. Though I don't always agree with you, I know you are an expert in the gold and silver mining area, and trust your judgment when it comes to this. Needles to say I rec'd your blog as well as the article you link to.

I added your top pick GRS to my portfolio (with real money and here in CAPS) because I was looking for a good miner to add when you published this artice. To boot, I got the stock at $7.77. What can go wrong?

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#14) On December 23, 2010 at 3:09 PM, leohaas (32.57) wrote:

OOPS:

"To boot, I got the stock at $7.77. What can go wrong? "

My comment turned out the be #13!

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#15) On December 23, 2010 at 5:06 PM, Valyooo (99.45) wrote:

Christopher,

What do you think of AEM?  My only PM position is GPRLF, I am thinking of adding AEM.  It got crushed after earnings, but it still looks perfectly fine to me, and in general is one of the better charts and companies.

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#16) On December 24, 2010 at 11:37 AM, silverminer (31.25) wrote:

leohaas,

i'm so glad to hear it, and aside from your lucky numbers you scored a very attractive entry price. That's now a terrific long-term hold to last you the remainder of the bull market trend. Well done!

Valyooo,

I just got your CAPS name. :P I always pronounced it with 3 syllables, so it went right over my head. Too funny. Anyway, speaking of great valyoos, I believe AEM is right up there. The funny thing about doing a top-ten list in a sector this favorable is that some amazing plays are unavoidably omitted, and this is one of them. It was my top pick for 2009, and I've never ceased characterizing it as a premier mid-tier selection despite the string of delays and near-term disappointments over the course of their aggressive growth spurt (now completed, and those snags are par for the course in the industry).

I have the highest regard for AEM's management, and I often try to position myself in the junior pink-sheet stocks of companies that I think AEM might wish to purchase for the next phase of its growth trajectory. The fact that its organic growth spurt is essentially complete, and subsequent growth is likely to be via acquisitions is perhaps a key reason that it drifted off my top ten for this year (since the market routinely punishes acquiring stocks), but I hasten to point out that AEM is still my sixth-largest holding in my real-life portfolio, and it would be among the last holdings I would look to reduce as this trends eventually winds down. I see these shares hitting $200 before this is over. So I guess it's certainly a top ten as a hold, whereas this list was more geared towards a top ten for new money. I expect some of the leading dividends in the industry to come from AEM.  

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#17) On December 29, 2010 at 11:12 AM, rebello15 (< 20) wrote:

hey sinch, what are your thoughts on sandstorm resources?

SNDXF

speedybure's writings made me aware of it

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#18) On December 30, 2010 at 12:08 PM, XMFSinchiruna (27.47) wrote:

rebello15,

I own a very small stake. It looks promising.

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#19) On December 30, 2010 at 12:59 PM, TMFBabo (100.00) wrote:

Christopher,

I have finally capitulated and added some gold and silver stocks to my CAPS portfolio.  I've decided to outsource my gold and silver stock picking to you.  I only added 4 companies today, but it's a big step for someone who prefers oil and gas to gold and silver.

I noticed that you have had a "top pick" check mark on DBLE for quite a long time.  I recently designated it a top pick as well (we're the only 2 who have done so) and it is currently my favorite oil and gas company.  I was wondering what your thoughts were on this company.  I'll add the short version of my thoughts to start:

I went to every oil and gas conference website I could find and looked at all the presentations with the audio muted.  I found that companies that were undervalued wanted higher share prices and would let you know the amount of reserves, sometimes even comparing market cap or EV to reserves.  This was not a useless exercise - companies with significantly undervalued stock prices who need extra money to drill cannot issue equity to raise money for drilling if they care about their shareholders at all.

My goal was to find the most undervalued oil and gas juniors.  I settled on DBLE: it had the best combination of market cap to reserves ($55M market cap vs. $229.7M PV-10 of just 1P reserves) and developmental plays: 70,000 net acres of Niobrara spread across the Atlantic Rim, the Hanna Basin, and the Powder River Basin and the Table Top Unit in Utah with a potential unrisked 2-3 Tcf target.

I've identified 3 separate catalysts for DBLE:
1. Higher gas
2. Successful drilling in the Niobrara: 1-6 vertical exploratory wells slated for July 2011.  I'm sure horizontal drilling would come next to maximize EUR bbl per well.
3. Successful Table Top Unit development: Environmental Impact Study to finish in 2012 (started in 2009 with a stated duration of 3 years)

Over 90% of production comes from the Atlantic Rim and the Pinedale Anticline, low-cost gas fields in Wyoming.  DBLE is generating $23M in CFFO even at current prices (helped a bit by its hedges, of course).  Still, I believe there will be decent cash flows even without the hedges because the gas fields are decently low cost.

In order of excitement, I'd say the Niobrara acreage is first - even using 320 acre well spacing instead of 160, outrageously low % drillable, and low EUR bbl per well, I still come up with asset valuations higher than the current market cap.  Second is the proved gas reserves to current market cap - not much to say there.  The Utah acreage looks exciting, but it looks quite costly and management will have to farm out working interests significantly in order to develop the acreage.

I'm already convinced of the tremendous value and have already bought up to my personal limit, but I'd still love to hear from the only other "top pick" designator - especially one whose opinions I respect.

Paul

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