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7/15/08

Fortuna Silver and gold

Gold currently at $983/oz and I have no trading block on board, having sold it last Friday at $964. So be it; this move still suits me and my long term preservation of capital positioning just fine.

However, I'm going to highlight Fortuna Silver (FVI.v) once again to any hungry bargain hunters there may be out there.

I wrote in a private missive last night that of all the downers in my portfolio right now, FVI is the most frustrating. In fact rather than waste my own time, here's what i wrote (with slight adjustments to protect the innocent):

I'm down 20% on the position (more or less), but it's the one that is
the least explicable.

FWIW i've been in contact with the mgmt at this one, and everything is
100% green lights at the company. They have cash to get all the way
thru to FFS at the Mexico project, financing will not be a problem
. Also at Caylloma, production is now at 1000tpd (was 853tps
and rising in Feb/March)
all silver production is unhedged and 45% of
zinc and lead production is hedged at an average of $1.10/lb for 2008.

It's just getting beaten up by wider market sentiment...it sucks. But
with silver at $19 this crapola can't last
.

The fact that silver is now trading at over $19.43 at time of writing.....

(thanks kitco)

..and nearly half the company's zinc and lead production is hedged at prices well over today's spot is not to be taken lightly. This thing has been beaten up in the junior stocks downdraft, but it's a cash flow positive company that has enough on hand to build the very promising San José Mexico mine without recourse to the dreaded credit market if need be. It has plenty of cash at bank, and is earning around $6m EBIT at the Peru Caylloma plant per quarter, so the present $1.66 price is more than ridiculous.

Am I guilty of banging on the table on this one? Yes, guilty as charged. A well-run company that makes plenty profit and with rock-solid expansion plans being given away. I own and I'm adding at these levels. A long-term outlook and no margin account gives me comfort zones.

Important: DYODD, we're all big girls and boys, yeah?