Excerpt from an article I published on Seeking Alpha. Click here to read the entire piece (embedded video only here):
Five years ago, I wrote an article titled “Despair Deep In the Silver Mines” to describe the sympathy selling in silver miners that owned property in Bolivia after the government there declared it would nationalize natural gas fields. I suggested at the time that the swoon was a buying opportunity. Sure enough, the despair faded as no nationalization of silver mines ever occurred.
On Thursday, Bolivia’s mining unions asked “…the state to ‘recover’ the silver, zinc, lead and tin mines currently operated by private firms,” and Bolivia’s mining minister announced that the government may rescind concessions on mines, including property operated by Pan American Silver (PAAS). This proclamation came on the heels of news earlier in the week that Bolivia was likely to soon pass “The Law of Mother Earth” granting nature equal legal status to humans, a world first.
So, no surprise that PAAS dropped 9% on the day even though PAAS has not yet heard through official channels any notice about nationalization. I re-established a position in PAAS at the close anyway. As readers may recall, I trade the miners around my core silver position (in SLV) under the assumption that the steady rise in silver prices will tend to bring the miners along for the ride – meaning dips are buying opportunities. However, the latest dip into despair is perhaps the most precarious in quite a while. I think PAAS has top-notch management, so I am betting that something short of asset seizure will get worked out eventually.
(Click here to read the rest of the piece)
Be careful out there!
Full disclosure: long SLV, PAAS, and GLD