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Big Silver Goes Hunting

Buyouts in Silver

Written by Christian DeHaemer
Posted March 12, 2013

We first introduced you to market darling Orko Silver in Wealth Daily back in 2011.

We wrote:

Since we believe that silver will continue to outperform gold, our best bet is to invest in the purest silver assets we can get our hands on. That means investors looking to leverage rising silver prices should own physical silver bullion, silver ETFs, silver royalty companies, or primary silver companies.

But for the most bang for our buck, investors will look to primary mining stocks — and more specifically, primary silver exploration and development stocks.  

A good example of a primary silver development company is Orko Silver (TSX-V: OK).

In 2004, Orko Silver used their extensive experience in mineral exploration and discovery to identify and acquire the La Preciosa property, an early-stage silver project in Durango, Mexico, that they believed had huge exploration potential...

When they originally acquired La Preciosa, it only had about three million ounces of silver resources. But after five years of development using modern exploration techniques, the company increased the resource estimate at La Preciosa by over 4,700%, to 146 million ounces of silver.

Orko's stock subsequently increased some 6,280% — from $0.05 to nearly $3.20 — in 2011.

That's a heck of a run.

Since then, the silver market has been beaten up a bit. But Orko has held up fine.

In fact, one large company liked them so much, they bought them out lock, stock, and barrel.

Silver Miners Go Bargain Hunting

As you know, there is big money to be made in buying the right silver mine.

Recent market action is telling us this is the right time to go prospecting.

Coeur d’Alene Mines Corp. (NYSE: CDE), is the United States' largest silver producer. They just bought Orko Silver (TSX-V: OK).

Bloomberg reports:

There are some incremental-sized deals that could have an impact on our existing assets between now and 2016 that we’ll turn our attention to,” Chief Executive Officer Mitch Krebs said in an interview yesterday. The Coeur d’Alene, Idaho-based company will consider deals “smaller than Orko but big enough to be meaningful enough to the company,” he said.

Coeur agreed last week to buy Orko for C$346.2 million ($337 million), trumping a bid from First Majestic Silver Corp. (NYSE: FR) The company plans to start production in late 2016 from Orko’s La Preciosa project in Mexico, one of the largest undeveloped silver deposits in the world, Krebs said.

It is common for the buying company's stock to go down on news like this, so it's telling that Coeur d'Alene's stock went up.

CDE cited depressed market valuations and financing problems for the juniors as reasons that pushed the sale through.

The market gods know the Toronto metal stocks have gotten absolutely hammered over the past year. It's at the point where some large companies are seeing value...

Back in New York City...

In other silver news, the white metal got some love last week after a multi-month sell-off: Silver futures rose last week, gaining 1.7% to $29.00 a troy ounce at mid-day Monday.

Miners, producers, jewelers, and other commercial users were still net short 29,183 contracts, but they eased up 1,703 contracts from last week. It could be investors are looking at the positive economic numbers from last week and buying silver at the lows.

Silver is still an industrial metal used in everything from heath care to defense, and the increase in employment last week suggests it could move up on an expanding economy.

It's good to buy silver on the dips.

There are four factors pointing to higher prices: increased industrial use, increased jewelry use, strong demand for the physical metal, and the possibility of a falling dollar due to constant Fed printing.

All the best,

Christian DeHaemer Signature

Christian DeHaemer

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Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor's page.

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