Part VII: Three Undervalued Mining Stocks

For real out performance, I look to the small-cap mining stocks themselves. Here are three things I look for in miners:

1. 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.
2. 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.
3. 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.

I have no doubt that silver will be breaking out to the upside soon – and 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 this job worth it.

Check out my new gold and energy blog at MoneyAndMarkets.com