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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