An investor would need an abacus to keep a count on all of the companies that are exploring for gold and silver in Mexico. Many of the majors have projects in the country (although the biggest of the big gold miners, Barrick Gold, does not).
Goldcorp (NYSE:G) (TSX:GG), the number-two gold producer in the world, has eight developmental projects or operating mines in Mexico. Relating directly to silver, Industrias Peñoles, the world’s largest silver producer is based in Mexico. Fresnillo plc has five producing mines -- all of them in Mexico -- including the largest silver mine on the planet.
Ironically, Mexico is still not considered a traditional mining nation by seminal agencies such as PricewaterhouseCoopers, which keeps Australia, the U.S., Canada, South Africa and the U.K. as members of that group. Outsiders of the group do not mind, however, as the shift in trend to emerging nations is booming. As of 2010, 45% of the world's top 40 mining companies were based in emerging nations, according to a PwC report. Is it a true paradigm shift or just a fad? Given the fact that net profits of those 40 leaders surged to $110 billion in 2010, an increase of 156% over 2009, it’s probably going to continue to gain momentum.
Looking to capitalize on the fact that Mexico has leapt past Peru as the largest silver producing country in the world, Vancouver, B.C.-based El Tigre Silver Corp. (TSX-Venture:ELS) (Pink Sheets:EGRTF) has sharpened its claws and dug into prime, silver-bearing Mexican land.
The company currently owns 100% of nine mining concessions comprising 43,098 hectares located in the Sierra El Tigre, northeastern Sonora State in Mexico. The company’s flagship property, the El Tigre Silver Mine, historically produced large quantities of gold’s first cousin; producing an estimated 75 million ounces of silver at an average grade of 40 ounces per ton.
Recent drilling by El Tigre has intercepted silver to the tune of 11.69 metres of 180 grams per tonne silver including 1.28 metres of 511 grams per tonne. Drilling is ongoing and aiming to confirm silver-gold mineralization believed to extend approximately 2.5 kilometres along the strike of the vein system.
Savvy investors cover the full gambit of research in due diligence which means studying the technicals of the given company’s stock chart. In the case of ELS, the chart looks locked and loaded and sitting at a critical point that typically will not last long. At 40 cents, El Tigre is trading well off its 52-week lows of 18 cents and also on a dip from its 52-week high of 81 cents, which triggers the possibility of a value opportunity.
As far as indicators, take your pick and they are all saying virtually the same thing: a downtrend happened on the slide from the highs and now it looks ready to reverse course and head back into bull mode. The MACD has been trending upward since early in May and is steadily nearing the zero line, often referred to as "the money line" for the bullishness in trend that is being demonstrated as it is broken from the south side.
The RSI has been forming an uptrend for just as long and is registering over 50, another indication of positive momentum.
What makes this chart stimulating is the fact that the price has not climbed extremely fast which gives it the feel of a spring coiling with the compression cap being resistance at 41 cents. Beyond that, firm resistance doesn’t enter the picture until roughly 52 cents -- a 30% premium to current prices. Moreover, the price per share is now above the 50 day simple moving average and pressed right against the 200-day SMA. The most basic definitions of technical analysis explain that bullish charts are trading over top these key SMAs.
Add it all up and El Tigre appears to be a chart that should climb quickly to the top of a watchlist to see if it can break through the resistance with ears to the ground for any news about its silver properties in Mexico potentially acting as a catalyst. As always, investors are encouraged to conduct their own due diligence and consult with a financial advisor prior to making any investment decisions.
