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Silverado Gold Mines poised to benefit
from gold up-cycle
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 Almost
one month ago, we wrote an
article on the explosive profit potential of an attractive
Canadian mining company, Silverado Gold Mines Ltd. (Symbol:
SLGLF:OB). This extremely well-managed, 30-year-old mining
concern had recently undergone a complete restructuring, is
unhedged, and was clearly being accumulated by the well-informed
insiders and big-money traders. Our forecast for an upside
move to $0.60/share was fulfilled to the penny less than four
weeks later as Silverado exploded from its trading range near
$0.30 to its mid-July high of $0.60 (intra-day). While we
fully expected such an impressive percentage gain, we were
totally unprepared for its rapidity in achieving this objective.
Not surprisingly, the stock has pulled back somewhat from
its previous highs and is once again undergoing consolidation
along an important chart level before its next upward swing.
We feel it is only fair that we update Silverado's position
and our opinion of its near-term performance potential as
a courtesy to our loyal readers at Gold-Eagle, 321gold and
at other gold-related Internet sites.
Let's review Silverado's fundamentals,
which have not changed in the short time since publishing
our first Silverado outlook. Fundamentally, Silverado has
a number of positive factors in its favor. It possesses fully-owned
claims on five large properties in Alaska. One property is
close to the Kinross Ft. Knox mine with a 6 million-ounce
reserve. Silverado traded over 180 million shares this year
and had an all-time high of $11.00 set back in 1980. Also
in Silverado's favor is the fact that it is near the completion
of a US$4 million financing project to bring their largest
mine into profitable production this summer at $105/oz. cash
cost. It has similar costs to Canadian mining companies trading
on the NYSE such as Goldcorp (GG) and Meridian (MDG).
Silverado has a 440,914 oz. reserve,
with the expectation of over 2 million ounces upon further
exploration. Moreover, its conservative 3-year profit target
has been put at US$19.5 million net on the first 70,000 ounces,
with a profitable first full year production of US$5.1 million
un-hedged.
Another important recent development
was announced by Silverado on Tuesday, July 16. The company
stated that the latest advance in its share price has enabled
it to raise adequate funds to commence mining on the Nolan
gold mine in Alaska. The company has cash of approximately
$1.4 million. The company further stated that its is working
to close an additional $US 3 million financing to carry through
with a complete 3-year production plan as described in a previous
press release. The company has also applied for a German market
listing on the e-Nasdaq to satisfy the appetites of the European
gold investors. Silverado should begin trading on this exchange
sometime in July. The reaction of the market to this news
was definitely positive and corresponded to the intra-day
turnaround in Silverado's trading session on Tuesday. From
a tape reading perspective, this is a plus and shows that
Silverado enjoys technical support, even in a time when the
broader gold market cycles are bottoming.
Silverado's technical outlook is
still impressive from our vantage point. Silverado's big intra-day
decline on Tuesday, July 16 was big in percentage terms but
the buyers managed to erase most of those losses by the end
of the day and closed at $0.39 on very high volume. This could
be a preliminary bottom but we won't know until we see at
least two consecutive days of follow-through. Tuesday's intra-day
decline reversed at precisely an important trend line area,
so this indicates a definite organized attempt at supporting
the stock by professional traders. Silverado will do well
to get its legs back by consolidating above $0.40 and no lower
than $0.30 for a little while before attempting another move
up. If Silverado can remain above $0.30 for the balance of
July (and we believe it will) it will have an excellent chance
of joining the rest of the major gold players in the next
rally. And once the previous high of $0.60 is overcome it
will have an excellent chance of making it to the next equilibrium
objective of $1.20 by the end of the year.
Another factor worth considering
is that Silverado does fully owned claims on 5 properties,
which is quite impressive for a company of its size. To buy
the Nolan Mine at today's price could cost over US$70 million
and that's not including the other 4 properties near major
producing fields. Upon further exploration, the five properties
could hold the key to years of production worth a few million
ounces.
Fortunately for traders and investors,
Silverado garnishes a solid platform for future revenue, and
most of all, plenty of liquidity to buy and sell as you please.
The liquidity will most likely attract major institutions
as they begin to look at the gold market, especially in light
of Silverado's extraordinary year-to-date performance.
A conservative target for Silverado
for 2002 would be $1.15-$1.20 based strictly on the cycles
alone. When combined with price equilibrium studies, float
analysis, and other technical measurements, plus considering
the fact that moves to the upside in runaway bull markets
tend to go "overboard," it would not at all be surprising
to see Silverado exceed even this level by year's end.
Clif Droke
http://www.clifdroke.com
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Disclaimer:
The author's objective in writing this article is to invoke
an interest on the part of potential investors in the stock
to the point that they are encouraged to conduct their own
further diligent research. Neither the information nor the
opinions expressed should be construed as a solicitation to
buy or sell this stock. Information provided in this report
are from sources believed to be reliable, they always depend
on the reliability of our own credible sources. Investors
are recommended to obtain the advice of a qualified investment
advisor before entering into any securities transactions involving
the stock.
Clif Droke-:
is the editor of the weekly Bear Market Report, a combined
forecast and analysis of U.S. stocks and indices and international
precious metals stocks, and is the author of numerous
books on trading and technical analysis (most recently
Gann Simplified, published by Traders Library).
For a FREE COPY of the Bear Market Report
send e-mail to: cdroke9819@aol.com
or write:
The Bear Market Report, Clif Droke, P.O. Box 3401,
Topsail Beach, N.C. 28445-9831.
or visit his website
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