Paramount Gold and Silver Shares Plunged: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Paramount Gold and Silver (AMEX: PZG  ) fell nearly 13% on big volume in early trading, continuing a weeklong slide that has seen the stock lose more than 18% of its value over the past five days.

So what: Paramount is suffering not just from falling gold prices but also the Jim Cramer Effect. He slammed the stock during Friday's episode of Mad Money, saying the whole gold sector was heading south over the short term and that Paramount was not his "favorite" to own.

Now what: I'm not a gold analyst so I can't tell you whether the fall in Paramount is justified. Cramer may be right. Analysts aren't expecting the company to record profits during the foreseeable future.

Even so, when it comes to situations like these I'd rather get advice from a gold expert like fellow Fool Christopher Barker. When asked which gold stocks he liked most entering 2011, Paramount didn't make the list and it still doesn't. (Click here to see his top pick right now.)

Interested in more info on Paramount Gold and Silver? Add it to your watchlist. You can also try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. 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 is also on Twitter as @TheMotleyFool. Its disclosure policy is at least 10% better than other disclosure policies.

Read/Post Comments (4) | Recommend This Article (1)

Comments from our Foolish Readers

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  • Report this Comment On March 15, 2011, at 5:51 PM, FIRSTFREEDOM wrote:

    This is nonsense and horse crap. PZG will soon go hyberbolic. Cramer is a crook and a liar. Also since GG ABX AUY IAG UXG are all down more than PZG does that mean that they are suffering from the Cramer effect or does that mean that PZG will soon blow the doors off GG ABX AUY IAG UXG. PZG will be 5-7 by mid June. Christopher Barker is in the wrong job if he can;t see that PZG is a winner.

  • Report this Comment On March 16, 2011, at 12:35 AM, EllenBrandtPhD wrote:

    PZG is a necessary hedge for all CDE holders, most of whom own it!

    Either CDE buys it, or Fresnillo or Carlos Slim will. Period.

    (And it could be soon, with yet another PM stock hot bidding war going on right now, off the front page, as it were, because of Japan related market problems.)

  • Report this Comment On March 25, 2011, at 12:21 PM, frankinCA wrote:


    I believe Carlos Slim will buy it because he doesn't know as much about mining as the miners and the hard facts of borrowing money to finance construction or selling off part of your production to silver wheaton to finance construction. Slim has lots of cash to waste and it won't affect his balance sheet significantly. He is also going to offer that which makes it mostly in his favor and not the stock holders. He knows that the increasing price of silver is in a temporary bubble and will settle to a price less than $50 an ounce after going to maybe, $85 an ounce. If he is really smart he will try to buy CDE or Fresnillo. Or finance gold mines in Colombia.

    While CDE is mining and profiting, while times are great for precious metals, they know that the many years of effort and cost to investigate an ore body and set up the equipment will make PZG a drag on their bottom line.

    Their possible partnership with Inmet to develop a huge well documented copper mine in Panama is a better choice for Couer, as they are looking to the future and aren't going to ignore copper as an always in demand metal for infrastructure use and coinage. The measured reserves of the ore body has sufficient gold to cause the precious metal people in the company to drool, and Panama welcomes miners because they are too dependent on the Canal. Mines provide good paying jobs too, that aren't subject to too much automation. They are going to limit the size of trucks to use more drivers and control automation so that it doesn't decrease the use of hard working people, who pay taxes and need a useful role in society. Panama is leading the way to stress, not the bottom line, but encouraging corporations that provide jobs for the benefit of all it's people as well as profits for it's shareholders. With enough workers the taxes on the corporations can be minimal, people love work and having to pay taxes to help their fellow man. Ask any unemployed person!

    . Their great cash flow source now is going to be the seed for a MUCH greater cash flow in the future (5 years). These benefits are even more certain with copper and gold becoming a greater part of their portfolio.

    Don't forget the gold in Gayana that they, CDE, is looking into, that is claimed to be an extension of the huge ones of Africa. (That's not a pun foolish friends).

  • Report this Comment On April 11, 2011, at 11:09 AM, trout114 wrote:

    I am a firm believer in the San Miguel property. My business partner owned this property for many decades. I formed a small company in the 90's to try and develop the property. We were inadequately financed and could not even afford to do all of the drilling required to prove sufficient reserves. The area was sufficiently remote at the time, that just getting there was an undertaking. Nevertheless, the geology of the area and all of the nearby small mines and workings showed the area to be of great potential. My belief in the property was enough to get me to buy a few shares several years ago. The only reason I didn't buy more was my unfamiliarity with Paramount and the caution one should exercise in investing in small Canadian mining companies.

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