Silver Silver Everywhere

Now that silver prices have slipped a couple of bucks since the start of 2011, and even larger-cap legends like Silver Wheaton (NYSE: SLW  ) and Hecla Mining (NYSE: HL  ) have shed more than 15% in little more than a month, silver's rising star may be pausing in our solar system one last time before resuming its stellar ascent.

The first thing Fools may discover when they examine the silver star through a telescope is that it's surrounded by a galaxy of high-quality equity prospects that may be hard to reach through conventional means. For most investors without direct access to the Canadian exchanges, a concerted foray into silver will lead through an asteroid belt known as the Pink Sheets.

Frustratingly illiquid, easily manipulated, and decidedly off the radar of securities regulators, these (most-often) unsponsored ADRs are something of a black hole in the investment world that few seem interested in exploring. In order to access quality small-cap silver producers like Aurcana Corporation or ECU Silver, many will have to settle for a proxy to the Canadian-listed shares -- a proxy perhaps best described as digital scrip.

First Majestic Silver (NYSE: AG  ) recently jumped to the big board, and the stock's trading volume has increased visibly as a presumed consequence. As NYSE Euronext (NYSE: NYX  ) EVP Scott Cutler pointed out in First Majestic's press release: "[First Majestic] and its shareholders will benefit from the deep liquidity and global visibility offered to Canadian companies cross-listed on the NYSE". But you don't have to command a $1 billion-plus market cap to benefit from a cross-listing. I have observed small-cap silver names like Endeavour Silver (AMEX: EXK  ) and Alexco Resource (AMEX: AXU  ) drawing noticeably more attention from investors and media outlets alike, as compared with their non-U.S.-listed competitors.

Of course, I believe that both Endeavour Silver and Alexco Resources fully deserve the relative fanfare they've enjoyed on the merits of their laudable achievements. Alexco has executed beautifully on its transition to producer status, while Endeavour Silver has combined ceaseless organic production growth with an uncanny knack for locating fresh reserves.

To some extent, my own misgivings regarding the nature of unsponsored ADRs on the Pink Sheets are outweighed by the strength of my conviction regarding the growth potential of select companies in the space. I personally own multiple Pink Sheet holdings, but I would much prefer to hold the real McCoy. I encourage Fools who share my displeasure with these unsponsored proxy vehicles to join me in contacting your favorite Canadian resource companies that are not listed on a major U.S. stock exchange, and encourage them to fast-track such a listing.

Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of Alexco Resources, Aurcana Corporation, ECU Silver, Endeavour Silver, First Majestic Silver, Hecla Mining, and Silver Wheaton. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (10) | Recommend This Article (27)

Comments from our Foolish Readers

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  • Report this Comment On February 03, 2011, at 10:04 AM, Gonzhouse wrote:

    Good advice. 6 months ago I asked my broker to buy Primero on the Canadian stock exchange and wound up with it's unsponsored MNOCF. For a while I wasn't sure what I had bought; not recommended for a good night's sleep.

  • Report this Comment On February 03, 2011, at 10:12 AM, silverminer wrote:

    Gonzhouse,

    Primero's CEO Joe Conway has indicated to me personally his company's interest in pursuing a U.S. listing. I too hold MNOCF, and look forward to the conversion to a U.S.-listed exchange.

  • Report this Comment On February 03, 2011, at 3:03 PM, hdotmom wrote:

    "He owns no shares of Alexco Resources, Aurcana Corporation, ECU Silver, Endeavour Silver, First Majestic Silver, Hecla Mining, and Silver Wheaton."

    Now that I have been reading all of your articles....I know this is a typo, of course you own these, but for a newbie this could be confusing.

  • Report this Comment On February 04, 2011, at 8:57 AM, silverminer wrote:

    hdotmom,

    You're absolutely right ... that was a typo. :) Thanks for bringing it to my attention.

  • Report this Comment On February 04, 2011, at 5:30 PM, SN3165 wrote:

    "He owns no shares of silver, at all, whatsoever, and may god have mercy on your soul."

    LOL

  • Report this Comment On February 04, 2011, at 9:24 PM, hdotmom wrote:

    No problem...I want to add, thank you for all of your blogs and articles. I have been reading everything you have written lately and have found everything very informative and interesting. I am one of the "crazies" that believe our dollar is in for a crash so I want to invest and prepare for it. You can not possibly know how much you have helped! Thank you! :) Rose

  • Report this Comment On February 07, 2011, at 1:11 PM, Gonzhouse wrote:

    Chris,

    While I generally regard technical analysis, as the quip goes, "as existing to make Astrology respectful" I came across this Seeking Alpha article on the possible coming explosion of silver prices. I agree with overall premise that silver is grossly undervalued. But I believe the essence of upward silver prices, and your analysis-approach, is value and demand/supply based.

    So I'm really interested in whether you think this author's technical analysis has real-world merit or whether he's cherry-picked items to make his case. I found I can't dismiss it out of hand. Thanks for the consideration and your willingness to share thoughtful insights.

    http://seekingalpha.com/article/251161-will-silver-prices-ex...

  • Report this Comment On February 08, 2011, at 1:19 PM, XMFSinchiruna wrote:

    Gonzhouse,

    I have no beef with the basic precepts of the piece you linked to above, though I'm not sure I would classify it as "technical analysis". I too have observed the recent backwardation on COMEX, and I too consider it a signal of increased differentiation between physical silver and attempts to multiply supply via paper. That is, at its root, a fundamental development as much as it is a technical one.

    I have long held $50 as my conservative price target for silver (since 2007), and I personally have zero doubt that we will get there.

  • Report this Comment On February 25, 2011, at 11:23 AM, jammonit wrote:

    Does anyone have a fundamental analysis of silver prices related to investment inflows? It seems to me that as the miners continue to ramp up and scrappage is exploding, new investors are keeping the price going up.

    The problem, it seems to me is that investors absorbed about 300 million net ounces in 2010 at an average price in the $20s say $23 for simplicity, that means that over $6Billion of NET NEW MONEY was allocated to silver.

    So if investors are to absorb the almost 400 million ozs estimated for 2011 that would require twice as much net new money as 2010.

    The problem as far as I can tell is that the need for net new money doubles with every 30% rise in the metal price.

    Unless someone can explain to me where I'm wrong, silver is the greatest short in the history of the world.

  • Report this Comment On February 29, 2012, at 12:36 AM, Yeti434 wrote:

    I enjoyed reading this one. I started looking at one Junior, Pretium, and bought when it was just around 7$ a share. Very happy with the growth.

    I actually do not own any physical silver myself, preferring to stick with equities. SLW,

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