The oft quoted saying, referring to the Chinese symbol being the same for crises and opportunity, has indeed provided such an opportunity. The single biggest fear for investors in legitimate mining companies (i.e., where the mineral actually exists) is an accident that temporarily halts production. Such an occurrence happened to HL’s Lucky Friday mine in December. Today, the company announced that the government regulators are making them keep the mine closed for the rest of this year to repair the damage and make the facility safe to reopen. Naturally, the stock is getting crushed. This is one of the major reasons why I have repeatedly recommended 90% of one’s assets be invested in CEF (no mining risk) and only the rest be considered for a speculative trade in HL.
The opportunity is that HL still expects to produce 7 million ounces of silver in 2012 versus its earlier projections of 9 to 9.5 million ounces before this development. The silver in the ground doesn’t disappear like an oil spill. It is still there. It will cost more to bring out with the added expense of cleaning up and repairing the facility, but their production cost of about one dollar an ounce is insignificant to the price of silver. So, anyone who hasn’t bought HL before, gets a chance at a much lower price, and anyone who has a position at my previously recommended price at 5.55 on October 13, 2011 can get in at a 20% lower price to add to positions. Remember, if silver is going much higher, which I still believe more than ever, than this is a perfect example of a short-term crises leading to a longer-term opportunity. Just keep in mind that it is a “mining” stock and therefore should be treated as such with the associated risk, as opposed to CEF, which holds the gold and silver bullion in physical form. Buy HL below $4.50.