If I asked you what happened in the year 1492, you’d probably say: “Columbus discovered America.†But have you stopped to wonder why the Queen of Spain was financing expeditions to the West at that time?
It wasn’t because some watery Italian named Columbus told her the world was round. Indeed, it was really about lots and lots of gold … and even more silver!
What’s more, mines that the Spanish discovered and worked back then are still being worked today. In fact, some of the most undervalued silver mines in the world still bear the marks of the Conquistadors.
More on these Mexican mines, and how you can invest in them in a moment. First, a little history …
Setting Sail for the New World
For 800 years, the Spanish had been fighting Muslims for control of the country. The last battles were finally fought in 1492, and the soldiers of the Spanish “Reconquista†were suddenly unemployed. These holy warriors had nothing to do but potentially plot a rebellion.
Spain needed a distraction … so when Columbus showed up and said he knew a shortcut to India, King Ferdinand and Queen Isabella saw a big opportunity. After all, there were lots of pagans in India … enough to keep a horde of holy warriors busy for a good, long time. Plus, India was rumored to be fabulously rich in gold. For a risk of three ships, the potential payoff was huge.
With Spanish backing, Columbus found the New World, and the soldiers found their new purpose in life as Conquistadors. One of these Conquistadors, Hernan Cortez, led an expedition into present-day Mexico.
In Mexico, the Conquistadors found gold as well as natives who were willing to trade it for beads, scissors, and trinkets. But the Spanish wanted more. “Go see the Aztecs,†the natives told Cortez.
A Mysterious People
Rich in Gold and Silver
The Aztecs did have a lot of gold, and they didn’t value it very much except as a metal to make shiny things. They called it the “excrement of the gods†(I’m not making this up!) and traded it for feathers and stones that could be used in their elaborate costumes.
The Aztecs were awed by the Spaniards’ white skin, metal armor, guns, and especially their horses. The Spanish also benefited from a legend that pale-skinned gods would return from the East. Cortez told the Aztecs: “Send me some more gold, because I and my companions suffer from a disease of the heart which can be cured only with gold.†It sounds like a line out of Monty Python, but the Aztecs were happy to oblige.
The Spanish weren’t just after gold though … silver was also plentiful in Mexico. The Conquistadors found mines all over the place – thick, rich veins of silver that could sometimes be pried out of the rock like boards from a barn. How much did they find?
- The yield from Mexico’s mines doubled the world supply of silver in less than two centuries.
- By the 1700s, Mexico’s silver mines were producing nine million troy ounces of silver each year.
- If you include production from Bolivia and Peru, from 1530 to 1800, approximately $6 billion to $8 billion worth of gold and silver were mined in the Spanish American colonies.
This wealth made Spain an international power, and the richest country in Europe for a time.
However, there’s good news for today’s investors. The Spanish never came close to exhausting Mexico’s vast deposits of precious metals …
Now’s the Time to Scoop
Up This Overlooked Silver
In the old days, the Spanish and Mexican miners would only take the visible silver. They didn’t realize that the black rock around them was thick with silver ore!
Plus, many of Mexico’s silver mines fell into decline. In the 20th Century, as political winds shifted and the price of silver cratered, mining the metal was often more trouble than it was worth.
But now the price of silver is rising, and Mexico is eager to work with companies that will reopen and recapitalize its old mines.
I believe the timing is right to invest in silver. The metal is well off the highs it hit earlier this year, but its bull market is still intact. It has gone through the kind of consolidation that is normal and necessary in any bull market.
Look at my chart of silver: You can see that prices are coiling up like a spring. A big breakout should come next.
That’s because there are many forces driving silver higher. Here are four of them:
- According to research consultancy CPM, the amount of silver in above-ground reserves is at a 50-year low.
- Last year, there was a gap of 35.5 million ounces between fabrication demand for silver and the conventional supply from mine production and scrap.
- The silver ETF (SLV) recently filed papers to issue another 16,822,727 shares in its silver trust. At 10 ounces per share, that will take another 168 million ounces of silver off the market.
- For years, the supply of silver from mines has not been able to meet demand. There are new silver mines coming online, but they’ll probably be playing catch-up for quite some time … potentially years.
How can you take advantage of all this?
One way is through a precious metals fund like U.S. Global Investors World Precious Minerals Fund (UNWPX). Its holdings include Goldcorp, Northern Orion Resources, and Bolivar Gold. It has a total expense ratio of just 1.43% — lower than the industry average — and has returned 33% this year.
However, for real out performance, I look to the small-cap mining stocks themselves. Here are three things I look for in miners:
Large resources: The companies must have millions of ounces or be working on defining large resources in historically rich districts. This makes it more likely that the big boys will target them for takeovers.
Near-term production: Exploration is nice, but the biggest gains will likely come from miners going into production in 12 to 18 months. Amazingly, you can even buy producing Mexican silver mines for pennies on the dollar.
Great management: To me, this makes all the difference between a grand slam and a near-miss.
Now, let’s talk about the kind of bargains you can find South of the Border. Here are three Mexican silver mines that I really like …
A company that is sitting on more than 14 million ounces of silver and should increase its resources to over 35 million ounces. Right now, you can buy its resources for about 37 cents on the dollar. What’s more, this mine will be producing over three million ounces of silver next year!
Another miner with up to 80 million ounces and the potential for more. You can buy this company’s assets for 12 cents on the dollar, and it’s a potential moonshot even if just half its potential resources pan out. Plus, this company expects to have annualized production of four million ounces from two mines starting next year.
A third miner that has measured and indicated resources well over 100 million ounces. You can buy its resources for just 49 cents on the dollar! Wow!
By the way, these aren’t just silver mines; they also produce other metals like gold and zinc.
Here’s the most interesting part. While the Conquistadors had to travel to Mexico for their mines, the companies I just told you about are all listed on Canadian exchanges, and are easily bought through U.S. brokers.
In fact, subscribers to my Red-Hot Canadian Small-Caps service own all three of these stocks. They’re already racking up gains, even though silver prices are still consolidating. And I have no doubt that silver will be breaking out to the upside soon — these stocks could lead the way.
In two weeks, I’m flying down to Mexico to make an on-site visit to a mine that really interests me. It’s high in the mountains … far removed from civilization … reachable only by air. I love it! This is the kind of exciting stuff that makes my job worth it.
If you want the play-by-play, it’s not too late to join my service. Indeed, this is a great time to get started. Check out my latest special offer and sign up for Red-Hot Canadian Small-Caps immediately.
Yours for trading profits,
Sean
P.S. As a special bonus for subscribing to my service, I’ll send you my 47-page report, “The Golden Age of Uraniumâ€. It’s packed with insights, forecasts, and five red-hot uranium stocks. These stocks are already on the move, but they should have much, much further to go in what could be the biggest bull market of the century.
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About MONEY AND MARKETS
MONEY AND MARKETS (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Sean Brodrick, Larry Edelson, Michael Larson, Nilus Mattive, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Regular contributors and staff include John Burke, Amber Dakar, Monica Lewman-Garcia, Wendy Montes de Oca, Kristen Adams, Jennifer Moran, Red Morgan, and Julie Trudeau.
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