It's every investor's greatest dream: Checking your portfolio and discovering an overnight 10-bagger. Moves like that are the stuff of legend, but this time, it was just smoke and mirrors.
Coeur d'Alene Mines
Fun and games aside, the split will help Coeur d'Alene Mines to remove the stigma of its painfully low share price, while addressing a quirk of the brokerage-industry fee structure that often punishes purchasers of lower-cost equities. I consider the split a positive move, since institutional investors can be constrained by guidelines requiring a minimum share price. With hedge funds exhibiting substantial interest in precious metals, highlighted by Paulson and Co.'s stakes in miners like AngloGold Ashanti
Ironically, I believe that Coeur d'Alene is poised to become a multibagger the old-fashioned way. First of all, I expect silver prices to track gold prices higher, and perhaps even outperform gold thanks to the slingshot effect. With production ramping up nicely at the world-class Palmarejo mine, the company expects to produce 20 million ounces of silver in 2009. This places production nearly on par with Pan American Silver
Of course, it wasn't long ago that Coeur d'Alene hit rock-bottom at just $0.36 per share. With silver prices languishing in single digits, and development delays placing the company in an acute liquidity crisis, for a time it appeared that even billions of dollars worth of buried treasure might not save the storied miner. Assurances of sufficient development capital gave way to convertible note offerings, and even today, S&P cautions that further capital might be required. With production set to expand rapidly, though, I consider these liquidity questions as temporary as an illusory 10-bagger, and I continue to foresee precious growth ahead for these juiced-up shares.
Further Foolishness:
- The Top 10 Reasons to Hold Gold, Part 1
- How rich is Goldcorp?
- Have you dipped into silver streams?
