I’ve heard this a time or two just lately, myself. I’ve heard a couple of people opine out loud that they thought it was too late. I don’t believe I convinced them that they were mistaken. Have you had the same thought?
“After 100%-Plus Gains, Is It Too Late to Buy Gold Stocks?
By Louis James, editor, International Speculator
Deep under a mountain, but so high up in the Andes that I could barely breathe, I found one of the best money-making opportunities I’ve seen in my entire career.
I was in an old mine tunnel. The ore was massive sulfides of lead and zinc, with high grades of silver. These sulfides sparkle brightly in the light from your miner’s lamp, like chandeliers. Usually, you see a narrow vein with a little of this stuff sprinkled in it. You look up to see it in the ceiling of the tunnel, or slashing a wall.
Not this time. The entire tunnel – a good four meters wide by four meters tall – was blasted through a zone of massive sulfides so thick, it all sparkled in my lamp. The walls, the ceiling, the floor, everything. It was like walking through a field of stars.
On the old mine posts, I could see the assay numbers left behind by the old-timers: 9% lead-zinc, 12%, 15% – with hundreds of grams per tonne of silver. The rock had more than $500 in contained metals in some places.
I asked the mine geologist (who was my guide) how anyone could leave so much value behind. He told me that the old-timers were only interested in the highest-grade ore of the deposit, which ran to more than a kilo of silver per tonne.
The speculation was that not only could these high-grade (by modern standards) remnants be mined, but that more bonanza-grade silver and gold could be found as well.
That potential was made very real to me when we returned to the surface. I could see that the rock alteration visible on the mountain above the vein was repeated up and down the valley, showing the location of other veins. Many had been worked in colonial times – the mine has a history that goes back more than 400 years – but there were plenty more to explore.
The vein is called Animas. It’s part of the Caylloma Mine camp in Peru. The company is called Fortuna Silver Mines (symbol: FSM). At the time, it was an exploration company that had just bought the mine with its 7 million ounces of silver in historic mine reserves for $7.6 million. Experts were skeptical that a little explorer like Fortuna had what it took to put Caylloma back into production and make money.
This was back in January 2006. I could see plain as day that the mine was a cash cow just waiting to be given the attention it deserved, surrounded by enormous blue-sky potential. I wrote a report saying so while still in the field, and Casey Research founder Doug Casey recommended the stock at C$1.15 in an investment alert on January 27.
Now, here’s the thing: The stock had been trading for less than C$0.20 for years. At C$1.15, it was already up more than 500% for those in before it became obvious that the gold and silver bull market underway was real.
So, I had to ask myself… was I too late?
What if we put a “Buy” on the stock only to provide exit liquidity for the early birds? What if Fortuna fell on its face in the transition from exploration to production? That’s actually a very common outcome. What if we were being the new “stupid” money, chasing after a stock that had already risen to ridiculous levels?
If I had let such fears stop me, we would have missed out on what happened next.
Fortuna doubled within two months. We were able to take profits on March 29, 2006, at C$2.38. The stock came within kissing distance of C$7 in 2011. It gave much of that up in the multiyear bear market that followed. But earlier this month, it hit an intraday high of C$12.73.
That’s more than 10 times the price of our initial recommendation – and the company is still adding new value today. (emphasis mine)
Ten-baggers are no myth.
The point of this story is not to brag. In fact, there were many ups and downs, we took profits along the way, and we were in and out of the stock. So our official gain on this pick is not 1,000%, even though this was possible. (And just imagine if we’d been in at C$0.20!)
The point is that back in 2006, when I was asking myself if I was being stupid for recommending a stock that was already up 500%, I chose to drive forward looking ahead, not in the rearview mirror.
This is critical. If I had let how much the stock had already risen paralyze me, we would have missed out. Instead, I made the decision based on the huge value the company was clearly set to deliver. We took the plunge.
As the great Canadian philosopher Wayne Gretzky said: “I skate to where the puck is going to be, not where it has been.”
And the point of this is that smart people thinking about investing in gold and silver today are asking themselves the same questions I was asking myself in 2006. Gold has risen 31% from its low of $1,053 per ounce late last year to its recent high of $1,384. Silver has been up as much as 54%.
“Is it too late?”
My answer is no.
I understand that it’s hard to put money into stocks that have risen sharply in recent months. Many of our stocks are up more than 100%, 200%, and even 400% since their lows at the beginning of this year. But that has more to do with how oversold they were than what is likely to happen next.
In seeking to skate to where the puck is going to be, we look for value to be added ahead. It’s just as when I made the call on Fortuna back in 2006. All of the companies I currently recommend buying in the International Speculator have huge value to add.
This is true even if the price of gold does not continue rising.
It’s true even if precious metals retreat toward recent lows.
Actually, if gold and silver did correct sharply before heading higher again, that would be the best thing in the world for those just getting into related stocks. It would create great buying opportunities. At this point, this may actually be likely. You want to be ready to take advantage of it.
I’m excited about the work I’m doing now. It’s not enough to have a portfolio of winners in hand. I’m traveling more than I have in years, scouring the world for new opportunities.
I knew this day would come during the down years. Now that it’s here, I’m having a ball putting all I’ve learned from Doug and many of the best geologists in the world to work on my readers’ behalf. I may wear out another pair of boots, but it will be worth it.
We’re all about to make a pile of money.
Frankly, I could not agree with him any more! And, since he was specifically mentioning Fortuna, and how it was still adding value, I felt I should share this, as it is one of our favorite holdings, too.
The metals are up a good bit this morning, as well! As I write, gold’s up $13+, and silver’s risen $.24. Each are up by more than 1%! Look out!!!
Here’s to your accumulation of real wealth!
Harold F Crowell