Zinc & Lead break out to new Highs.
(Klondike & Silver remain cheap)

Silver Stock Report

by Jason Hommel, October 11, 2006


Zinc and Lead prices are breaking out and making new highs, and I did not read one single news story on this event today from any source.  Shocking.  Seems everyone is alseep, thinking we are still in a "correction" for commodities because oil and gold, the heavily manipulated commodities, are still down.   Also, nickel, molybdenum, and uranium are headed upwards at full steam.

Zinc broke out and hit $1.73/lb., and lead broke out and hit $.68/lb. 

Take a look at the kitcometals charts for zinc, and look at the stocks of the metal in decline:
http://www.kitcometals.com/charts/zinc_historical.html

 

It's almost the same story for lead.
http://www.kitcometals.com/charts/lead_historical.html

 

Prices are up, as inventories are in decline.  It's doesn't get much more clear than that.  Commodities dead?  No way. 

We have a 2 year structural problem in zinc, where no new major projects will come on line in that time frame, and we have zinc inventories at the LME getting cut in half in the last 6 months from about 230,000 tonnes to 130,000 tonnes with no major price change.  Clearly, zinc prices are not high enough. 

Furthermore, China is slated to boom for the next 15-20 years. 

I twice predicted that zinc would lead the pack (just echoing other news sources, and looking at the obvious).

I said on June 2:
http://www.silverstockreport.com/email/Zinc.html
"And when zinc begins to shortly hit new highs again, above $1.75/lb., I suspect that this "dip" in the metals will be over."
(Read that article for more details on why!)

I said on September 2:
http://www.silverstockreport.com/email/stock_picks.html
"Zinc inventories continue to decline, while zinc prices look ready to break out again above $1.60/lb."

My overall portfolio remains down about 40% from the highs of May 11, 2006.  I've "lost" millions of dollars on paper from those highs, (but I'm still up about 40% for the year!).  I'm not worried.  I can see that zinc inventories are down.

And I know that commodities booms last about 15-20 years, and this one may well last much longer with China booming--since China has over 4 times as high as the population in the U.S.!

Looks like zinc will lead the pack out of this correction in commodities, and the zinc stocks should start booming, too.

Besides the usual zinc/silver stocks you all should already know about that are all on dips (and so it's time to buy), I'd like to bring to your attention a new company that came out this spring.  (It's also on a nice price dip.). 

Chart

Klondike Silver. (KS.V - TSX)  It has silver, lead and zinc.
http://www.klondikesilver.com/
The share structure seems difficult to access, in part because the website info is dated Jan. 2006, and in the finance reports, many shares may need to be issued for all the properties, so management has to keep track of a lot.  (It kind of seems like many companies turn this into a sort of puzzle game on purpose, so that investors who work to find the information feel as if they are doing "real work".  And that bothers me.  They should keep it simple, and up to date, and have more respect for their investors than this.  I work hard to "keep it simple", and so does kitco and yahoo.  The companies should put this info on the front page of their web site, and it should be updated daily, if necessary!)
The finance statement at Sedar filed on Sep 28 2006, for May, 2006, shows about
32 million shares outstanding and
14 million warrants and
3 million options.
On July 31, there was a placement for 7.7 million units of shares and a warrant, for another 15.5 million shares.
Total: 64.5 million shares fully diluted.
@ $.38/share x .88 Cdn/U.S.D. = $.3344
$21.5 million Market Cap, fully diluted. 

Take a look at the smartstox interview here:
http://www.smartstox.com/interviews/ks.php
Richard Hughes is famous for his track record of success, and is very highly regarded in the industry by the people I talk to.

Or, read the smartstox report:
http://www.smartstox.com/reports/KS.pdf

See the list of 19 properties klondike has here:
http://www.klondikesilver.com/properties.cfm

The basic story is similar to many, such as Clifton, Cabo, O.T. Mining, & Sterling Mining.  Klondike quietly acquired many properties at the bottom of the market to acquire a virtual monopoly in a highly prospective historic silver mining camp (The Slocan camp) of historic high grade producing mines that were never explored with modern methods.  Klondike also has a 100 tonne per day mill, and could start mining quickly, cheaply, soon.  (Soon was the story 2 years ago.)

Klondike has acquired so many properties this year, I've not even had time to keep up with it.  I'm just glad I own some stock, and that the company is doing the right things in this bull market:  Acquiring properties (and not so quick to produce).  And we ought to be buying stocks.

Timing for this stock:  Don't drive this stock too high tomorrow at the open.  Be patient.  The "correction" may be ending, and now may be the time to buy aggressively, but there are many warrants at $.20, and that will keep downward pressure on the share price, and will help the company bring in more cash to develop properties.  Also, there are many other good companies to consider.

Disclaimer:  I own over 1/2 million shares of Klondike, and as many warrants.

Sincerely,

Jason Hommel
Make money -----> silverstockreport.com
Get healthy ----> jasonhommel.com/rev22
Build your faith ---> bibleprophesy.org
& help others do the same!

P.S. Here's a 500 word article on silver I wrote recently for someone who has connections to place this editorial in circulation in a large national magazine.  You will notice that much of the copy is taken from my introduction page at silverstockreport.com.  This is a good, quick, hard hitting message to print out and share with your family and friends who may be reluctant to invest in silver.

Silver Prices must go up, and you can make a fortune in silver.

Paper money is now a total fraud, and has no gold backing, none whatsoever.  The U.S. gold has not been audited since the 1960's, and may no longer even exist.  If it does, the "official" U.S. gold hoard of 261 million ounces can back up the currency with one ounce of gold for every $40,000 dollars in the U.S. domestic banking system. 

There has been less than 5 billion ounces of gold mined in all of human history, worth about $3 trillion dollars.  But there is about $50 trillion of paper money in the world, and about $50 trillion of debt.  So, gold should go up in value at least 10-15 times, or more. 

Gold is money, because of its fundamental nature; it is a great store of value; it's liquid, portable, rare, a luxury item, lasting, durable, divisible, recognizable, verifiable, and can't be counterfeited. 

Silver is like gold, but better, because silver is being used up by industry.  More silver is used up by industry, jewelry and photography than is mined every year. 

Silver demand may not decrease with higher prices, because silver jewelry can become more fashionable as prices rise.  And in most industrial applications, silver is a tiny percentage cost of the overall product. 

Further, as silver prices rise, investment demand will increase, as it's hard to beat 30% gains every year, as silver has been doing since 2003.

Silver can protect you from rises in gas prices!  Oil is now about $60/barrel, but silver is only about $11/oz.  In 1980, oil peaked at $43/barrel, and silver peaked at $50/oz.!  And in 2000, oil bottomed at $10 barrel, and silver bottomed at $5/oz. 

Peak oil experts say that there is only about a 40-year supply of oil left in the ground, but there is only about 14 years supply of silver reserves in the ground!  Silver’s the better investment.

As silver and oil prices return to historic ratios, silver prices will rise to about $30-$70/oz, up from $11/oz. today, and if oil moves even higher, silver will move higher with it!

If silver could be counterfeited, our copper clad coins would look a lot more like silver than they do.  Silver coins are easily recognized by anyone who has ever held one, and felt the difference in weight.

Silver is so rare today that many of the best experts say that there is barely 300 million ounces of silver in refined, deliverable form.  With 300 million people in the U.S., then if you have even one single ounce of silver, then you may have “more than your fair share”, and are either an evil, greedy, capitalist pig, or a wise steward of your own wealth.

A day’s wage over 100 years ago used to be up to a silver dollar, or as little as a silver dime.  You can buy those same silver dollars today for much less.  Get some.

Jason Hommel