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tr Iowa c- Www cl Des oppo Iowa tunities that may reside in exploration targets within Fortunas massive 58,000-hectare concession package. I have much more to share from my recent mine tour, so please stay tuned tomy ongoing coveragefor further insight into San Jose as a springboard for Fortunas exciting growth spurt.
1.Scorpio Mining(OTC: SMNPF)
When your investment outlook for an entire sector is as bullish as mine is for silver, reducing a long list of quality operators down to a top-10 list presents a daunting task. I must concede to no shortage of agony in omitting some first-rate vehicles like thewrongfully assailedSilvercorp,perpetually undervaluedPan American Silver Part-time neNYTimes.com, or even theclerically challengedCoeur dAlene Mines. And considering the strength of the investment rationales for each of the preceding nine picks, I trust its clear that the selection of my No. 1 silver stock involved some considerable deliberation.
Scorpio Mining leapt out of relative obscurity and straight into the spotlight of emerging junior silver producers following its strategic acquisition of Platte River Gold in 2010. Unfortunately for me, I was slow to adapt, so I missed out on a prompt double in Scorpios stock during 2011. I dont intend to make that mistake again, and thankfully a bargain valuation continues to signal a green light for this Fool to continue acquiring shares during 2012. A key aspect ofmy strategic preference for minersover bullion boils down to the opportunity to gain exposure to silver at a substantial discount to market value (even after accounting for development costs, production costs, and the myriad challenges and risks associated with mining activity). With the market valuing Scorpios 55 million ounces (measured and indicated silver resource) at just $6.93 apiece, I like my chances of turning a profit on those ounces as they emerge from the ground over time.
Widening the moat even more, Scorpios ample base-metal assets in copper, lead Buttoned Up: Get organize, and zinc yield a global silver-equivalent resource of 137 million ounces (presently valued at just $2.78 per ounce!). While some may shy away from production profiles where the primary target (silver) accounts for just 57% of revenue, I welcome the diversification that benefits as much from growingBetter profitable projects emerging-market industrial demand as it does from surging silver investment demand.
Following a 64% increase in year-over-year silver production from the flagship Nuestra Senora mine during the first nine months of 2011, I would not be surprised to see that growth trend pause for a bit this year. The core of my investment rationale lies, rather, with the prospect of two major decisions looming to expand Scorpios processing capacity in the region by some 300%.
Scorpios land holdings in the Cosala district span 29,000 hectares. In addition to the Nuestra Senora mine and mill, the company holds two advanced development projects (San Rael and El Cajon) and a silver/copper mine (La Verde) acquired in the Platte River acquisition that was under a lease until early 2011. During 2010, La Verde yielded decent quantities of silver and copper. Scorpio is conducting feasibility analysis of a proposed 4,000-ton-per-day plant to process ore from assets in the northern portion of its concessions, with release of that study targeted for the third quarter of 2012.
Definition and exploration drilling continues at a steady clip, with an updated resource estimate at Nuestra Senora expected during the second quarter. Because the company has warned of observed discrepancies between the existing resource model and recent assays from development and drilling, Fools may wish to hold back on building a full position in Scorpio Mining until that updated resource estimate is in hand. Any negative reaction to ounces that might be lost at Nuestra Senora could yield a more compelling entry point from which to catch the potential catalyst of a positive plant construction decision to process ore from the more northerly resource areas.
There you have it, Fools! Following a marathon of research and deliberation, I offer the above stocks as my top 10 silver stocks for 2012. Please be sure tofind Part 1 of this countdown hereto review my other five selections. To follow all my ongoing coverage of the precious-metal miners, pleasebookmark my article list, orfollow me on Twitter. Naturally, I have issued bullish calls for each of the CAPS-ratable stocks on this list withinmy Motley Fool CAPS portfolio, and I invite each of you out there toconsider following suit.
Looking for more ideas? Download The Motley Fools special free reportThe Tiny Gold Stock Digging Up Massive Profits. Our analysts have uncovered a little-known gold miner that we believe is poised for greatness; find out which company it is and why we strongly believe in its future --for free!
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Fool contributorChristopher Barkercan be foundblogging activelyand acting Foolishly within the CAPS community under the usernameTMFSinchiruna. Hetweets. He owns shares of Aurcana, Coeur dAlene Mines, Endeavour Silver, Fortuna Silver Mines, Goldcorp, Pan American Silver, Silvercorp, Silver Wheaton. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has adisclosure policy.
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Sinch, thanks! I have been waiting for this list for a long time. I recently acquired quite a bit more of EXK at $8 and was super stoked. And AUNFF has been good for me for sometime now. I will have to look into Scorpio Mining and FSM in more detail.
Out of curiosity, what is your take on Impact Silver?
Thanks
J
JBay,
I am very bullish on Impact, and its a major holding of mine. Because of its small market cap, it was not available for consideration within this top 10 list.
Ill try to put together a separate list of my top microcap silver picks on my blog when I have some time.
For the rest of you, please bookmark my CAPS blog if youre interested in some of the smaller growth stories in gold and silver:
Wow I am shocked by this list! I was dead on with Aurcana Endeavor and Silver Wheaton but Scorpio threw me off guard. I am a shareholder too
Sinch if you can tell me a little bit more about Trevali it would be appreciated. I am trying to figure out how to value them, what to expect from earning this year now that they are officially a producer, etc.
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