Buy Silver At A 71% Discount!

| November 2, 2009 | 0 Comments

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.

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.

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Category: Commodities

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The Dynamic Wealth Report works with a number of staff writers and guest experts who specialize in everything from penny stocks to ETFs to options trading. These guest analysts post under the 'staff writer' moniker for ease of use.

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