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Dear Members,

On November 15, 2009, we announced a special feature report (click here for the report) on one of our favourite silver stocks, Silvermex Resources (TSX-V:SMR) when it was trading at CDN$0.32.

On Friday, they finally announced the closing of the Rosario Project acquisition.

Silvermex Resources (TSX-V: SMR) closed this Friday at CDN $0.45.

It's great to see Silvermex (TSX-V:SMR) shares trading higher and building support. However, their news release couldn't have come at a worst time as Gold and precious metals stocks fell sharply on Friday.

But as we looked deeper into their news release, something struck us.

More on that in a bit.

Friday was not a day for Gold. It took its hardest one-day fall in over a year after a surprise drop in the U.S. unemployment rate sparked a rally in the U.S. dollar.

Barrick Gold, the world's biggest gold producer, fell 8.7 per cent after the 9th U.S. Circuit Court of Appeals ordered a lower court to consider shutting down Barrick's $10-billion Cortez Hills mine in Nevada while the project's impact on the environment is examined more closely. Goldcorp, the second-largest gold miner fell  5.9 per cent. IAMGOLD dropped 5.1 per cent.

Friday was not a day for gold.

But have no fear. Inflation is near.

The U.S.'s budget deficit is now 13% of GDP. President Obama is continually looking to announce new trillion-dollar programs. You have heard it all before: Health care, cap-and-trade, expanding wars in Afghanistan, and whatever else is on his list of things that require big money.

Total debt for the U.S. is 90.4% of GDP for 2009 (without adding in unfunded liabilities like Medicare and Social Security.) According to the IMF, the US-public debt is expected to hit 93% of gross domestic product next year but other smart money analysts are predicting that will be much higher.

Take a look at the current estimated real-time debt clock for the US:

US Debt Clock
click above for real-time debt clock

Japan's public debt could reach 227% of GDP in 2010 -- greater than the combined annual economic output of Germany, France, Britain and Canada.

At the time of this writing, the US debt sits at over $12,080,600,000 - over $12 trillion dollars. That's roughly $111,045 of debt per US taxpayer.

What makes it even worse for Americans is that their government owns its own printing press - and it's not afraid to use it.

Remember a year ago when Bush sent everyone a $300 check? Cost: $152 billion. Result: Nothing.

Then the TARP gave failing banks $700 billion and, in effect, nationalized them. Result: Bankers sitting around a hot tub after receiving big bonus cheques.

Cash for clunkers? Need we say more?

Last year, the US spent $253 billion in interest to service this debt. By 2019, that interest payment could reach $675 billion on the low end. These interest payments are based on the fact that interest rates will stay low and the economy can ramp back up to 5% growth. But truthfully, a more likely scenario is that interest rates will rise significantly by 2019 to combat inflation.

That's why our overall long term outlook on gold remains bullish.


The smart money knows that the dollar will continue to fall. Hard assets like gold, silver, and foreign stock markets will continue to go up. Eric Sprott, who manages billions in assets, and correctly predicted in March of 2008 a "systemic financial meltdown" says:

"I believe no matter what environment you're in - deflation or inflation - people will run to gold," Sprott said. "Gold is proving exactly what we all would have expected, that in almost any environment, it's a go-to asset."

Sure gold may take its dips but in the end, it will continue its climb.

Next week, we'll discuss the many points why we believe gold will continue its long term run and give you an idea of what the big money players are doing.

But for now, lets not forget silver!


Unlike gold, silver is used in more commercial and industrial applications. The list is extensive - electrical contacts, mirrors, jewellery, currency coins, photographic films and as a catalyst in many chemical reactions.

Like gold, silver production is dropping. Much of it comes as a by-product of other mining and refining, primarily lead and zinc (which both fetch for just over $1/lb at current prices).

But due to plummeting prices created by over-supply, many lead and zinc mines were mothballed back in 2008. As a result, silver production stalled with lead and zinc - and inventories are now at historic lows.

That's the supply side of the equation. But what about industrial demand? In short, it continues to rise. So with silver supplies lagging, silver prices are likely to rise. At these prices, we think silver is undervalued.

Which leads us back to one of our favourite silver plays and our featured silver company, Silvermex Resources (TSX-V:SMR).

So lets break down Friday's news release so you can see what struck us

Their acquisition of the past-producing Rosario project, strategically located within 5 kilometers of their San Marcial Silver Project, now gives Silvermex all facilities and infrastructure at Rosario including:
  • 20 year surface rights agreement in good standing
  • 30 year water use permit
  • Underground workings and a tailings dam
  • Water access
  • 60 km - 33 KV power line
  • Offices, shops,120 man camp, infirmary, warehouses and assay lab.
The previous owner invested approximately $11 million in property payments, exploration, upgrades and renovations to the mine and mill site including upgrading of electrical substations and wiring, camp and accommodations, mine dewatering and detailed engineering of an 800 tonne per day (t/d) mill designed to be installed on the existing foundations and structures.

Historic production on the Rosario Project by Grupo Mexico, the prior operator, averaged 600 t/d from 1986 to 2000. During this production period a total of 2.5 million tonnes of ore were extracted which averaged 190.5 grams per tonne (g/t) silver, 0.92 g/t gold, 2.02% zinc and 2.38% lead.

The Rosario project is comprised of 2 past producing mines, the Plomosas-La Cruz mine and the San Juan Mine and were both operated by Grupo Mexico until 2001. Operations were ceased in 2001 due to low metal prices and a regional labor dispute.

Now be sure to keep in mind that everything we're stating regarding Silvermex's properties, with the exception of their San Marcial Silver Project, are historical facts and are non-NI 43-101 compliant.
 
Take a closer look at some of these underground channel samples from Plomosas-La Cruz Mine:

Plomosas-La Cruz Mine Channel Samples

Combine the high grade gold from these samples with the silver, lead, and zinc from these select samples and the rocks could be worth a lot of money!

Lets break it down a little more.

If we used a gold price of $1150/ounce, a silver price of $18/ounce, a lead price of $1/lb, and a zinc price of $1/lb, these are the results we get for the value of each tonne of rock from the above samples:

             Sample                              In-situ Metal
                                                        Value $/tonne


                 866                                       $1598.346/t
                 867                                       $1022.839/t
                 869                                       $1713.844/t
                 882                                       $313.2617/t
                 883                                       $2877.026/t
                 885                                       $1273.467/t
                 891                                       $1189.951/t
                 894                                       $1540.375/t
                 895                                       $1499.416/t
                 931                                       $782.0579/t
                 932                                       $483.5413/t
                 934                                       $644.2071/t
                 935                                       $1537.629/t
                 936                                       $921.0720/t
                 939                                       $1140.487/t
                 1244                                     $501.0800/t
                 1245                                     $605.9409/t
                 1251                                     $1216.938/t
                 1252                                     $694.2500/t
                 1257                                     $512.4797/t
                 1258                                     $850.6613/t
                 1261                                     $787.3339/t
                 1262                                     $310.5670/t
                 1263                                     $886.3744/t

Although the above are just samples from a non-43-101 report, those are numbers that should give any mine-savvy person goosebumps.

Now take a look at the San Juan samples:

San Juan Samples

The zinc, lead, and gold in the samples are not as high as their Plomosas-La Cruz samples, but look at the grades of silver!

The silver grades in the San Juan samples range from 223g/t all the way up to 1735g/t!

Now lets revisit their NI 43-101 compliant project, the San Marcial

The current mineral resource at San Marcial includes an indicated mineral resource of 18.0 million ozs silver, 55.3 million lbs of zinc (Zn) and 29.9 million lbs of lead (Pb) and an inferred mineral resource of 4.4 million ozs silver, 34.7 million pounds of zinc (Zn) and 19.5 million lbs of lead (Pb).

San Marcial Samples

Take a look at drill hole SM-4 where the interval is 53.95 metres grading 235 g/t.

Preliminary resource modeling has already determined that the resource at San Marcial hosts a near-surface, potentially bulk-mineable, high-grade resource of 1.13 million tonnes grading 321 g/t containing 11.6 million ounces of silver. The existing resource is open at depth and along strike and has been traced on surface for 1.6 kms.

When we featured Silvermex Resources (TSX-V: SMR), we based a lot of our excitement on their management team and their board which now includes big names from Silver Standard, Hecla Mining, and Timmins Gold. With the announcement of their recent acquisition, we couldn't be happier.
 
Until next week,

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Featured News:
Silvermex Completes Acquisition of Rosario Project - Click to Read

Zacks Investment: Thoughts On Dubai Crisis And GDP Revision

Click to PlayZacks Investment panelists discuss the impact of the Dubai credit crisis on the U.S. stock market and react to the revision of 3Q GDP and drop in initial jobless claims to a 14 month low. 

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By Dr. Marc Bustin, Editor, Casey Energy Opportunities

Dr. Marc BustinMarc BustinPh.D., F RSC, is the senior researcher for unconventional oil and gas for Casey Research. 
Considered to be one of the top authorities in the world, Marc is the go-to expertfor multinational oil and gas conglomerates, and is brought in to help evaluate finds around the world. Marc has reviewed more projects on his own than some exploration teams put together.

Recently, at the Casey Research Energy Summit - a two-day event showcasing the top minds in the energy industry - a small group of investors became privy to Marc's take on the future of natural gas... his prediction for where prices are heading next year... and some of the companies he believes will profit when natural gas takes off.

For an excerpt of Marc's presentation, read on...

Click Here to Continue Reading
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In This Issue
Silvermex Completes Acquisition of Rosario Project
Thoughts on Dubai Crisis and GDP Revision
Trueclaim Explorations Completes $1 Million Private Placement
The Future of America's Natural Gas
Barrick Completes Elimination of All Gold Hedges
Technical Trading Videos with Harry Boxer
Rainy River Drilling Continues to Expand Resources Potential
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Freewest Announces Increase in Purchase Price by Cliff Natural
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Taseko to Receive $180 Million to Joint Venture 25% of Gibraltar Mine
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Disclaimer and Disclosure

Regarding Historical Data: All resource estimates presented in this report for Silvermex other than their  San Marcial project are historical and were prepared before the introduction of National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101").

Historical resource estimates may not be relied upon until they are confirmed using methods and standards that comply with those required by NI 43-101. The potential for the exploration target to replicate the historical resource, or to reach the indicated range of tonnages, is conceptual and is based on historical reports, which cite approximately lengths, widths, depths, grades and projections of the historical resource. Readers are cautioned that a qualified person has not completed sufficient exploration, test work or examination of past work to define a resource that is currently compliant with NI 43-101 for historical resource estimates in the Silvermex Reports. We further caution that there is a risk that exploration and test work will not result in the delineation of such a currently compliant resource. Neither Silvermex nor its personnel treat the historical resource estimate or the historical data as defining a current mineral resource, as defined under NI 43-101, nor do they rely upon the estimate or the data for evaluation purposes; however, these data are considered relevant and will be used to guide exploration as the Company develops new data to support a current mineral/resource estimate in accordance with the requirements of NI 43-101.

For more information on Silvermex Resources, investors should review the Company's registered filings that are available at www,sedar.com.

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