I whole heartedly agree with Coach's article tonight. In fact it should have been Silver mining companies taking JPMorgan to court for illegally suppressing silver prices instead of investors. How much has the illegal activities of JPMorgan cost ECU?

Mexico Mike...

Putting their money in line with investors

Hi Bill!

There is plenty of documentation about the historic failure of mining companies to build shareholder value when they engage in hedging. It is so rare to see companies that choose to take action that is bullish for their own sector. Recall several months ago when Barrick finally stepped up and covered their hedge book, after making statements that were confusing to investors prior to that. Barrick took huge losses on the buy back of those hedges and lost more money than the 'gains' ever recorded in the program. And lets also consider that the very act of putting on a large scale hedging program when gold was trading near its lows was in itself a contributing factor to the long bear market for gold.

Investors would have been far better served to have no hedging in place at all. There are also a number of companies that have been driven into bankruptcy over the choice to take on hedging and the catastrophic consequences. So this news that some silver producers are now putting in hedges again in recent months should be of concern to all investors that may own or consider buying those stocks. I think it is appropriate for all investors to contact the management of the producers for which they own shares and communicate clearly that they do not support this kind of policy and would refrain from buying stock in any company that is engaging in hedging. Its that simple.

In general, the management of most junior mining companies have been inept at taking action to support their own sector and shareholders. There is very little commentary from these companies to dispute the volume of bearish nonsense that is widely reported in mainstream media. Very little is done on a proactive basis to confront the issues of market manipulation and naked shorting that has directly impacted the performance for many of the stocks in the junior mining sector. The management of these companies are well compensated and yet they appear to show very little interest at all to provide leadership and make clear statements about the positive fundamentals for their industry. Shareholders deserve more respect from those that are entrusted to lead the companies on their behalf.

How refreshing then to report on a conversation I had with a senior executive at US Gold. I have owned this stock for a while and keep in contact with management. The company recently closed a large equity offering to raise cash for the ongoing development at projects in Mexico and Nevada. However, they have chosen to make a statement in line with their shareholder interests and will be putting about $25 million to buy physical gold bullion, and another $25 million in funding to buy physical silver bullion. This is not some speculative venture on behalf of the company, but rather a decision to save some of the financial resources of the company by holding physical bullion itself.

US Gold has taken a stand to suggest they understand that gold and silver are money, and they believe the security of owning bullion is greater than in holding cash in a bank. They also indicate by their actions that they believe gold and silver are going to be worth more

in a few months time when they may need to convert that bullion back into cash to pay for their ongoing activity to build mines. People own mining companies because they believe the metals will go higher. Rather than sabotage the interests of investors with inept hedging practices, US Gold has taken a big chunk of physical gold and silver out of circulation, and may end up with a capital gain to help underwrite further development in the future. Imagine if more companies had the courage to take similar action. I know of dozens of juniors that state they are bullish on gold and silver and yet they hold tens of millions in cash, paying almost no interest, and have no bullion ownership at all. I also know of several mining stocks that lost tens of millions of dollars because they held some of their cash in speculative derivatives and mortgage bonds prior to the meltdown in 2008. How much better off would they have been if they had chosen instead to own the physical metals they claim to have leverage to? If just a few of these companies were led by competent management the entire sector would have a much more cohesive front to challenge thmalign interests that have been colluding against them.

When Barrick closed out their hedge book many analysts were stating that it represented the top in gold. Barrick has been among the most lukewarm management teams in the entire mining sector and yet they are held in high esteem by the clueless analyst community. I have not seen it reported anywhere that US Gold has taken such a courageous stand to support the sector. I am proud to own shares of this company and will step up to buy any other junior that makes a similar commitment to shareholders. This is the kind of story that should be told.

cheers!

MexicoMike