How you can make GOLD with Silver!

There’s a lot of uncertainty in the equity markets these days.  We’re up 100 one day and down 200 the next.  Who do you blame?   Greece, Ireland, the entire European Union? 

Maybe it’s the economic data. 

Anyway you look at it we’re surrounded by uncertainty.

But that’s not necessarily true for all the markets.  Just look at the precious metals markets.

Since the beginning of the year, Gold and Silver have outperformed almost everything.

We’ve seen gold hit $1,900, and silver has been trading well above $30.

There are alternatives to buying physical commodities, and one of the most popular is investing directly into precious metal producers.

As always there are positives and negatives with any investment. Investing in mining stocks instead of the mineral itself has added risk. Companies can mismanage their resources and make dumb decisions.

But they also offer a potential opportunity to make a much higher and faster return on your investment.

There is one thing I can guarantee: A gold or silver bar in a safe deposit box isn’t going to pay you a dividend. But the mining stock we’re talking about today is going to pay one this quarter.  

 

A LONG HISTORY
Hecla Mining (HL) still maintains the name it was founded under over a century ago. The company’s perseverance has secured its position as the largest silver producer in the U.S.

Hecla currently has two operating mines and a number of exploration projects. Their Greens Creek, Alaska mine accounted for approximately 75% of Hecla’s 2010 revenue. The Lucky Friday mine in Idaho accounts for the rest of their cash flow. 

The Greens Creek mine was discovered in 1975, with production beginning in 1989. Kennecott Greens Creek operated the mine until 2008 when Hecla purchased full control.

Hecla has owned and operated the deep underground Lucky Friday mine in northern Idaho since 1958. There are still considerable proven reserves in the Coeur d’Alene mining district where the project is located. In 2008 the company purchased an expansion to Lucky Friday known as the Gold Hunter deposit.

Lucky Friday is conveniently located a mile east of Mullan, Idaho and Interstate 90. It also has a mill capable of processing 1,000 tons of ore a day. The mill produces lead and zinc concentrates that are shipped for treatment to a smelter in BC, Canada.

Hecla then sells the lead or zinc concentrate to custom smelters. They sell their gold and silver in bullion form, both refined and unrefined, to precious metals dealers.

Who Says You Can’t Keep Costs Down In the US?

Hecla has managed to keep their cash costs low and their margins huge while operating in the U.S.

The mining industry has a convenient non-GAAP cash cost per ounce metric. It’s useful for comparing similar companies in the sector.

In 2010 Hecla was producing silver at a non-GAAP cash cost of negative $1.46 an ounce. With an average realized silver price of $22.70 an ounce, that’s a cash margin of $24.16.

It means they actually make money form all the other minerals they dig up, not counting the silver!  Talk about a silver lining!

Coeur d’Alene Mines Corp (CDE), which operates in the same Idaho mining district, had non-GAAP cash cost of $4.10 per ounce of silver in 2010. Silver Wheaton (SLW), a similar company, had a similarly high 2010 non-GAAP cost of $3.97 an ounce.

Even better for Hecla are the considerably higher realized silver prices in 2011. In Q3 2011 the average realized silver price was $37.02 an ounce.

Thanks to higher prices of zinc, lead, and gold, Hecla’s silver revenue is just about all profit. It certainly makes for an attractive bottom line and a nice healthy operating margin of 40%.

 

WHICH LEADS US TO DIVIDENDS
On November 8 2011 management announced a new silver price-linked dividend in their quarterly conference call. Phil Baker, Hecla’s CEO, said he believes this plan will make HL more attractive than similar silver companies and ETFs.

Here’s how it works. The minimum realized price of silver to trigger the dividend is $30. At that price HL common stock will pay $0.01. At every five dollar increment the dividend goes up another cent.

The average realized silver price in Q3 2011 was $37.02, which means a $0.02 dividend.
Here’s The Numbers

Hecla has had solid revenue growth over the past few years. Revenue was $312.6 million in 2009, and reached $477.6 million in 2011.

This company takes a lot of pride in having a low cost of revenue. Their 2011 cost of sales was only $212.6 million. Down from last year, and nearly as low as 2009’s cost of sales of $211.5 million.

Hecla’s net income in 2011 was up 208.6%. Net income in 2010 was $48.9 million. The company reported net income of $151.2 million for 2011.

Hecla had $266.5 million cash on hand at the end of 2011, and debt of $10.3 million.

 

HECLA’S FUTURE ENDEAVORS
Hecla, like any good mining company, is constantly exploring. They are always looking for expansions on and near their two producing mines, Lucky Friday and Greens Creek.

Near Lucky Friday is the Silver Valley district. Hecla and its subsidiaries are using 3D modeling technology and drilling to identify reserves and potential mineralized zones in Silver Valley.

The company also entered into a 2008 joint venture with Emerald Mining and Golden 8 to explore a 21-square-mile land package in Colorado.

The package is in the Creede Mining District in the southwest corner of the state. They’ve identified approximate reserves of 48 million ounces of silver.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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One Savvy Way to Profit from the Coming Nat Gas Boom

Ever get tired of all the fighting in Washington?
I know I do.

The uncertainty that it’s injecting into the market right now is criminal. This whole debt ceiling fight is entirely a tug of war between the Republicans and Democrats.

But, there is one area where both sides agree… Energy Independence.

Now I know there’s some disagreement there too… but the disagreement’s about the “HOW”, not the “WHY”.

When you step back and look at the energy independence debate, there is one clear winner.

Natural Gas.

The environmentalists on the left love it.

Face it, Electricity produced from natural gas generates about half the greenhouse gasses of coal. Natural gas is clearly the cleanest burning fossil fuel. For the environmentalists, zero emissions might be the ultimate, but admittedly unrealistic goal.

Big Business on the right loves it too.

Natural Gas is plentiful and cheap. And best of all, we have gigantic reserves here in the US. If Nat Gas goes mainstream, it would be great for suppliers, end users, and all the businesses in between.

Imagine if government fleets of vehicles were powered by natural gas.

Not only would it potentially save money, it would also be “enviro” friendly!

In April, a bill popped up in the House of Representatives with big implications. It would offer tax credits for purchases of natural gas vehicles. And a 50 cent per gallon fuel credit.

If that subsidy or a similar bill passes it would be a game changer!

That’s not the only news we’re seeing in the industry. In early July, General Motors signed an agreement with Westport Innovations (WPRT). In case you didn’t know, Westport is a leader in the design and development of alternative fuel engines… like those used for natural gas!

The partnership is aimed at engineering better natural gas engines, and enhancing controls, emissions, and performance.

Other companies are jumping on the Nat Gas bandwagon already.

United Parcel Service (UPS) and Waste Management (WM) have begun the process of switching their delivery vehicles to natural gas. The engines are significantly cheaper than they were last year.

Why the shift? It’s just good economics. A while back it was estimated natural Gas engines cold recoup an investment in just four years.

JPMorgan recently estimated that when we hit $150 a barrel for oil, the recoup period would plummet to less than six months.

So the question isn’t, “Will natural gas vehicles take off in the U.S.?” The question is, “When?”

Now let me introduce you to a fantastic little company set to profit from the Natural gas trend: Energy Services of America (ESA).

 

ESA’S BUSINESS
Let’s step back for a moment. You already know the end users of Natural Gas. And it’s pretty easy to find the Natural Gas explorers and drillers… there’s a whole industry around that.

But, have you ever stopped to wonder who built the infrastructure to move the natural gas from the wells to the customers?

Energy Services of America is an infrastructure construction company. They build the guts of the transportation and distribution infrastructure for big energy companies.

They do this with four separate subsidiaries.

C.J. Hughes Construction is a U.S. company specializing in pipeline distribution, transmission and utility contractors. Their designs and projects consist of natural gas, oil, water, and sewage.

ST Pipeline is one of the largest pipeline companies in Appalachia. They fulfill a niche market need of constructing pipeline through steep or rough terrain.

C.J Hughes Pipeline specializes in the construction of transmission pipeline facilities, with an emphasis on natural gas.

And Nitro Electric Company is a “full service” electrical contractor. They specialize in high voltage projects, general power and control, and instrumentation services. They also fabricate and construct pipe.

 

WHY ESA? WHY NOW?
ESA operates in the eastern states. Areas like the Virginias, Ohio, Kentucky, and Pennsylvania.

If you follow natural gas then you’ve probably heard of the Marcellus Shale formation. It stretches across many of the states that Energy Services operates in.

Hydraulic fracturing, or fracking, is growing in popularity. Because of that these shale deposits are becoming more attractive.

Fracking is the process of shooting high pressure liquid down a drill hole. It essentially fractures and breaks up the rock. This process releases trapped natural gas and drastically increases extraction rates and recoverable reserves.

Once the wells are drilled, somebody needs to build the pipeline to move the Natural Gas.

And remember, these guys own ST Pipeline. They’re prepared to lay pipe in areas other companies would balk at.

As fracking and drilling of the Marcellus shale increases, ESA is sure to see an uptick in business. Also, as Nat Gas prices climb, the greater the demand will be for ESA services as well!

Now, let’s look at the numbers.

 

ESA’S FINANCIALS
We all lived through 2011, and we all experienced the crazy weather first-hand.

Lots of rain, snow, and flooding. Unfortunately ESA operates in a lot of the heavily affected areas.

Remember, they’re laying pipe. That work has to be done outside. Mother Nature threw some serious roadblocks their way. And it shows up in the numbers.

The 2010 numbers for ESA looked good. The company generated $218 million in Revenue, and pushed $5.7 million to the bottom line. Like I said – good numbers.

Now 2011 had a rough start… and Chairman Marshall Reynolds admits it. He stated “the first two quarters of our fiscal year are normally challenging.”

That’s clear from the numbers.

The company only generated $143.4 million in revenue and lost $5.3 million for their fiscal year ending in September 2011.

Despite the rough numbers, the rest of the financial statements are looking solid. They have over $111 million in assets and $56.1 million in total Liabilities.

With 2011 finally over, I have high hopes for the numbers going forward. Because of how poor the earnings have been, the company valuation is very attractive right now…

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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ONE COMPANY CORNERING A $2.3 BILLION MARKET!

Right now, it’s easier to land a man on the moon than to cure cancer.

In many respects getting to the moon was easy. There are lots of things leading medical experts still don’t understand about the human body. It’s one of the reasons the medical research industry is such a robust market.

The other reason… the numbers.

According to the American Cancer Association, 569,490 people in the United States died because of Cancer in 2010.  They estimate there are around 1.53 million new cases of cancer every year.

Cancer has touched everyone’s life in one way or another. Maybe you’ve had a close family member die of cancer… or a friend diagnosed with the horrible disease.  You may have sidestepped the big “C” however you probably know someone doing battle right now.

Remember, the 1.53 million unlucky souls diagnosed last year are people. They need our love and support. And most importantly, they need treatment. Bottom line, cancer is put into remission by pricey hardware, expensive surgical treatments, and powerful drugs.

BSDM received FDA clearance to market the microthermx in august 2010. They also received clearance from EU regulators to market the new product line in Europe. This is a huge milestone as management estimates the potential world market for ablation devices to be around $2.3 billion.

Companies bringing powerful treatment to the frontlines of this disease are poised to reap not only huge financial rewards, but emotional rewards too!

Just take a look at BSD Medical (BSDM).

 

BSD MEDICAL’S BUSINESS
BSD Medical makes its money off some pretty advanced cancer fighting medical equipment.

They specialize in Hyperthermia therapy devices. Hyperthermia therapies entail superheating cancer cells with radiofrequency and microwave energy to damage or destroy them. Weakened tumor cells might suffer apoptosis, which is a certain type of cell death. If the cancer cells don’t die they at least become more susceptible to traditional treatments.

Right now BSDM produces superficial, deep, and internal hyperthermia therapy devices.

The various devices all target cancer cells in different ways. For example, superficial hyperthermia is noninvasive and used for tumors within centimeters of the skin’s surface. This is effective for treating cancers like melanoma and breast cancer.

Other products like the internal/intestinal device are used inside the body. An antenna is threaded into various parts of the body to deliver hyperthermic microwave energy. This technology can be used on prostate cancer, breast cancer, and head and neck cancer.

The company is working on even more powerful versions of these devices.

 

WHY BSDM? WHY NOW?
BSDM received FDA clearance to market the MicroThermX in August 2010. They also received clearance from EU regulators to market the new product line in Europe. This is a huge milestone as management estimates the potential world market for ablation devices to be around $2.3 billion.

With FDA clearance comes an ability to sell their equipment.

In early May 2011 the company announced a distribution agreement with CoMedical who specializes in selling noninvasive or minimally invasive medical equipment. BSDM’s hyperthermia ablation device is right up their alley.

The latest news indicates the company has since signed up two additional distributors. The company is continuing to work on additional distribution networks for the US, Europe, and other international markets.

 

BSD MEDICAL’S FINANCIALS
BSD announced earnings on January 9 2012. Now, keep in mind for whatever reason the company doesn’t use a traditional year-end… this reporting quarter ended in November 30, 2011.

The key to understanding their financials is that the business is still in development. Remember the ink is still drying on the new distribution deals. BSDM won’t magically see a huge influx of revenue overnight.

Keep an eye on their revenue over the next couple of quarters.

The key at this point is the balance sheet…the sales revenue will come in time. For now, we want to focus on cash and debt levels. And I like what I see.

The company reported just under $15.7 million in cash and no debt.

The company lost just over $5.3 million in 2011 and at that rate, they’ll be in business for at least 3 years before running out of money. But I don’t think that will be a problem. Once the company starts seeing sales from their distribution network, the losses should dwindle.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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