Gold-Silver Producer In Nevada Outperforming Peers

For many months, I highlighted the rising demand for precious metals from investors looking to diversify away from declining fiat currencies most notably out of Chinese and Indian investors.  The new Fed Chair Yellen may be sparking off an inflationary rally as gold and silver appear to breaking above key technical levels.

At the end of 2013, mostly no one wanted to own gold and silver bullion and definitely didn’t want the junior gold and silver miners as the price of gold declined from $1900 to below $1200 and silver declined from $50 to below $19.  I called it a historic holiday discount buying season.  Many who believed prices would continue lower and shorted may now be covering as gold and silver breakout and regain the 200 day moving averages and hit new four month highs.

Gold and silver appear to be making double bottom breakouts and the miners especially our featured juniors are soaring some making 100% gains in less than 10 weeks.  Don’t be surprised for healthy pullbacks to the 50 day trend which is beginning to slope higher as the bullish golden crossover of the 50 and 200 day in the Venture seems to be holding.

Demand for gold from China has been soaring during this pullback.  As many retail and marginal investors in the West got shaken out during the correction, major funds from emerging nations such as China, Russia and India have been buying gold and the junior miners.  India saw such demand for gold and silver during the correction that they had to institute import taxes.

Even in the U.S. the demand for minted gold and silver coins reached record levels as the price pulled back.  Now the markets may be predicting a big move in gold and silver as Yellen announces that she may scale back the taper policy.

During this pullback we advised patience and fortitude.  I actually continued to tell the stories of high quality junior gold and silver miners improving their balance sheets with increasing revenues and production such as Comstock Mining (LODE) who should produce close to 40k ounces of gold equivalent this year in the historic and prolific Comstock District.  They have attracted the who’s who of U.S. funds such as Van Den Berg Management, Sun Valley Gold, US Global Investors, Vanguard and Gabelli.

Comstock Mining (LODE) just released their financial results for year end 2013 which showed dramatic  fundamental growth and increase in the intrinsic value of the company.  Comstock recently completed a major expansion which could increase production by 100%.  This could reduce unit costs and increase free cash flow.

According to the recent Press Release, "Management believes the system is now capable of operating at twice the production rates of 2013, while identifying cost reductions of annual costs applicable to mining from the 2013 levels by over $6.5 million, to below $25 million for the 2014 year."

The company expects cash costs to go below $750 per ounce in 2014.  In addition, Comstock announced that they plan to drill priority targets at its high grade targets such as the Chute Zone in the near term.  The Chute Zone may be one of the most exciting new discoveries in Nevada.

Comstock continues to outperform the senior gold miners and the junior gold miners and is in a significant uptrend during this recent correction in the sector.  Despite weakness over the past couple of years in gold and silver prices, Comstock Mining has grown their resource base to 3 million gold equivalent ounces, started and expanded profitable production in the supportive mining jurisdiction of Nevada and expanded their major land position in one of the most exciting geological districts.

This recent quarter was very significant as they had an operating cash profit before capital expenditures.  According to CEO Corrado De Gasperis, "we are positioned to grow that profitable base, through the remainder of this year.”

LODE also recently announced a new lower cost $5 million revolving credit facility in order to assist with the increase in production and expansion of their Lucerne Mine.  Capital will be used to drill the east side of the Lucerne resource.  LODE’s ability to exceed production guidance in 2013 and their clear growth profile has allowed them to receive more favorable financing terms.

Comstock also announced recently the restructuring of debt and royalty obligations which eliminated $2 million worth of debt and royalties.  It is also important to remember that Comstock Mining recently secured over 300 acres of private land which will allow valuable growth opportunities.  The local community is widely supportive of the company as evidenced by the unanimous approval of Lyon County Board of Commissioners to approve zoning changes on certain mining claims.

LODE recently commenced a district wide plan to increase the resources and reserves.  The goal is to produce expanded mine plans that include the Lucerne, Spring Valley and Dayton Resource.  Investors should realize this is an historic district largely untouched by modern exploration programs.  There is the potential for significant production and resource growth in 2014 and beyond.

Listen to my recent interview with Comstock CEO Corrado DeGasperis below...

Disclosure: Author owns LODE and company is a website sponsor.

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