Follow the Founder of Pan American Silver

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Mining stocks rarely feature insider buying. Most mining stocks have millions of warrants that are ready to be exercised by insiders and brokers. However, when you come across a mining stock with substantial insider buying, it pays to pay close attention.

Recently, Ross Beatty, the founder of Pan American Silver ( PAAS ), bought about 300,000 shares of the company. His total stake is now over 2.1 million shares. Beatty paid between $15-17/share which is around where the shares currently trade ($16.33).

First of all, Beatty is not just any mining executive. He is largely viewed as one of the savviest and most honest mining stock executives in the industry. In fact, his nickname is "the broken slot machine" which is a reference to how many shareholders he has made wealthy.

A few years ago, Beatty gave up the reins of PAAS in order to focus on an alternative energy company called Alterra Power. As the shares of PAAS have been crushed over the last year, along with other mining companies, Beatty backed up the truck in a big way.

Beatty is not the only insider buying PAAS. In fact, the company has completed a 5.4-million-share buyback. PAAS also plans to apply for approval to be able to purchase another 7.6 million shares.

The board of PAAS and Ross Beatty most likely see several catalysts that could take the stock price higher. First of all, PAAS wants to start a large project in Argentina called Navidad. Unfortunately, the Argentine government wants to tax the property excessively. This situation will most likely be resolved when a new government takes power. For now, PAAS is content to patiently wait for a resolution.

Secondly, the company owns a mine in Bolivia. The threats of nationalization have most likely spooked many institutional investors. However, the actual threat is most likely not nearly as great as the saber rattling would suggest. The local workers are actually in favor of PAAS and the government would be crazy to upset a large union that is currently content working for PAAS.

Thus, the political situation is most likely being exaggerated to the detriment of the share price. Savvy investors like Ross Beatty and the board at PAAS have taken this opportunity to purchase shares at fire-sale prices.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing

Referenced Stocks: PAAS

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