Gold And Silver Have Disconnected From Commodities

Admitted Gold and Silver are both down a little today, but crude oil and copper (the commodities I follow most closely) cratered by more than 5% to multiyear lows.

I'll leave it to gold-theoridy to explain this, but given the alternative (when gold was correlated closely with crude) what we have now is way better for gold miners than early summer.

The crude oil collapse (and even the base metal price collapse) should be very good for pure gold producers (e.g. open pit heap leach operations) as their costs should fall substantially. Crude helps with equipment fuel costs (including diesel-electric operated mills). Lower base metal prices helps with equipment costs (and maybe even labor costs) as the suppliers of mining equipment and services should be have an oversupply of capacity.

So, you might want to adjust your portfolio (if you haven't already) to weed out precious metal miners with significant base-metal byproduct credits and focus on pure producers. Here's some of the ones I like the most (and own) that fit this category:

• Capital Gold Corporation (CGC.TO) - profitable heap-leach producer in Mexico. Watch out as it is really illiquid.
• Semafo (SMF.TO) - growing, recently profitable mid-tier gold producers.
• Metanor (MTO.V) - recently in production Canadian gold miner.
• Minefinders (MFL.TO) - just entering production heap-leach producer in Mexico. Stock is in a strong downtrend, but has shown that when it pops it really pops (10%+ in a day).
• New Guinea Gold (NGG.V) - gold-production funded gold explorer with pure gold open-pit heap-leap production and open-pittable multi-million oz exploration project underway. I'll be posting an update on this tonight (I hope), but there are certainly some issues that need to be considered before diving into this one.

Any other good, pure-gold or silver plays you like (don't get me started on Silver Wheaton and Silverstone as I don't consider them pure-precious metal plays because of third-party base metal counter-party risk)? Can these miners go up, in your opinion, even if gold continues to range-trade?

Leave me a comment.

MontyHigh

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