In an interview with The Gold Report, the Canadian gold and silver analyst Mike Kachanovsky, a.k.a. "Mexico Mike", stated that the precious metals bull market still has plenty of life left in it yet. Kachanovsky expects the world's current economic problems to persist, and that central banks will continue to monetise debt – which will eventually have inflationary consequences. This will benefit mining stocks and, according to Kachanovsky, especially benefit Mexican silver producers.
Despite the drug war in Mexico, Kachanovsky feels confident about the quality and the good prospects of the country's silver producers. He visits Mexico regularly, and notes that production is only slightly affected by the war between the Mexican government and the country's main drug cartels. There are many good reasons to invest in Mexican silver producers, as most companies are highly profitable and have strong balance sheets. In his view, Mexican mines generally have greater potential for growth in comparison with mines in many other producing countries.
But besides considering the excellent fundamental data, investors also have to keep an eye on the political situation in Mexico, with increasing numbers believing the country is spinning out of control. The drug war between the government and the country's main cartels is escalating and claiming more and more casualties. While mine production has not been hindered thus far by the conflict, senior mining employees are in danger of being kidnapped in exchange for ransom. Thus, the managerial staff travel with armed bodyguards. But putting to one side the cartel wars, and Mexico offers one of the best opportunities for investing in junior gold and silver producers.
Kachanovsky is particularly optimistic about the silver price. He is convinced that the silver price will break the $50 mark to the upside upon conclusion of its current correction phase, and thinks that the economic problems triggered by the financial crisis will continue to hold a strong grip on the world for years to come. Kachanovsky advises that buying gold and silver is a must for anyone interested in preservation of capital in the years ahead.
Investors who prefer taking risks might diversify their capital into junior explorers or – more conservatively – established gold and silver producers. Inflationary monetary policies from central banks will support gold and silver prices. Rising prices at the metals markets will in turn benefit mining stocks.
