| Recommendation:
Allocate 5% of your available Gold and Silver Trader funds to each trade below, and where “XX” equals the number of shares you would purchase based on allocating 5% of your available funds to each position … 1. Buy XX shares of Exeter Resource Corp., symbol XRA, at $0.76 or better to open. This order is good till cancelled. 2. Buy XX shares of Yamana Gold, Inc., symbol AUY, at $10.58 or better to open. When filled, enter a protective order to sell XX shares of Yamana Gold, symbol AUY, at $9.07, STOP. This order is good till cancelled. |
Dear Member,
It’s time to start trading select mining shares. Not buy and hold. But trade them. In and out on the swings.
So in this issue I’m recommending two mining shares. There are several reasons why I want to get back into mining shares and with a view toward actively trading them. Here are the chief ones:
FIRST, mining shares have been beaten to a pulp over the last two years, with the majority of companies in the sector losing as much as 78% of their value. Hence, a lot of the downside risk has already been wrung out of many of the mining companies.
Beaten down values also means that the upcoming swings in mining shares should see increased volatility, which creates multiple trading opportunities.
SECOND, several solid mining companies have made much headway over the last few months in reducing their production costs and increasing their mining efficiency.
Put another way, there are only a handful of good miners left these days, and they are starting to attract interest from investors again. This increased investor attention should make for some excellent trading opportunities.
THIRD — and most important — is the cyclical chart pattern for the mining sector.
Consider this cycle chart of the AMEX Gold Bugs Index, HUI.
This chart includes over 12 years of daily trading data on the HUI and over 1 billion calculations of that data to determine the most likely, dominate cycles impacting the index.
As you can see on the left side of the chart, the HUI Index is following the red cycle projection line very closely. The HUI even turned up right on cue in early July for the recent rally. But notice the cycle projection line and how it highlights next Tuesday, Aug. 6 for a final bottom before taking off to the upside.
Clearly, the cycle projections should soon turn outright bullish for the mining sector heading all the way into the Thanksgiving holiday period, the end of November. There will be swings higher along the way, also per the red cycle projection line, and the swings should make for some very good trades.
I know what you’re thinking, so let me address it right now. I am bearish gold and silver and expect one more sharp decline in the precious metals. So how could I be bullish the miners?
The simple reason is that mining shares and gold and silver prices do not bottom, or top for that matter, at the same time.
In fact, many mining companies saw their share prices top out before gold and silver did back in 2011. And more often than not, mining shares often lead gold and silver, topping or bottoming way before the underlying metals do.
I think we’re about to see that happen right now. Select mining shares may have already bottomed, or may do so by next week. Even if gold and silver move lower.
That said, I’m taking a conservative approach and only recommending shares in two miners today. If I see confirming action in the days ahead, I will not hesitate to add more miners to the active trading mix.
My strategy will not be for you to buy and hold. That is reserved for mining companies that are amenable to a long-term strategy and for my monthly newsletter, Real Wealth Report.
In this service, as noted previously, I will be looking to maximize profit potential by trading the swings.
Below are the two miners I recommend buying today along with a brief summary of their fundamentals. While the fundamentals are not all that important for short-term trading, I do want you to know that I will be focusing the trading on what I consider to be rock-solid miners.
Exeter Resource Corp. (XRA)
Exeter Resource Corp. (XRA) is a penny stock, a non-producing junior exploration company, but with very strong fundamentals.
The company has $44 million in cash and no debt. Its properties contain 19.3 million ounces of proven gold plus another 41.3 million ounces of silver and 4.6 billion pounds of copper.
Exeter’s Caspiche deposit in Chile, its most important property, is ranked in the top 1% of global gold deposits in a mineral belt currently undergoing an explosion of investment by the big miners such as Kinross, Goldcorp and Barrick.
Exeter also has two other projects located in Mexico, the Angeles and La Buena projects with excellent infrastructure and initial drilling results indicate high profitability potential.
Exeter currently has no loans or bank debt and has no plans to raise more capital within the next 12 months. With an estimated future production cost, net of byproduct credits, of a very low $238 per gold ounce or gold equivalent, Exeter is a winner.
NOTE: First, because is Exeter is a penny-stock, it is very important that you stick with my buy limit price of $0.76 or better. Do not bid up the stock.
Second, also because it is a penny stock, I’m not recommending a protective sell stop. Entering a stop would lead to the market possibly targeting the stop. I will monitor the stock for you and alert you when I think it is time to exit.
Yamana Gold, Inc. (AUY)
Yamana is an old-time favorite of mine, with excellent management. The company does have a high debt load, but it is of no worry to me as the notes are unsecured with the bulk of the debt maturing after 2018 at rates averaging about 4.5%.
The company does not currently hedge any of its gold sales.
It has more than 17 million ounce of proven gold reserves and 2013 production is expected to exceed 1.44 million gold equivalent ounces (GEO). This will represent an increase from 2012 production of at least 20%.
Yamana has also initiated a program to reduce its all-in production costs by approximately $150+ per GEO by the end of this year.
These cost savings will be realized through reductions in operating costs, capital expenditures, exploration and general and administrative costs. For a producing miner, all-in sustaining production costs of about $856 an ounce is excellent.
Per the table at the top of this issue, go ahead and act on these recommendations as soon as possible. Meanwhile continue to hold your shares in ProShares UltraShort Gold (GLL) and ProShares UltraShort Silver (ZSL) with your protective sell stops set at $85.09 and $82.19, respectively, on a good till cancelled basis.
Stay tuned and alert!
Best wishes,
Larry
