Veteran Café members know my sad, to euphoric, to horror show tale of my major precious metals investment, ECU Silver … now Golden Minerals. I went to Velardena, Mexico to view ECU’s major property in 1999 and became enthused about its prospects. The share price back then was 25 cents. I bought a bundle and the stock went to a ½ cent and was not allowed to trade for many months. Thinking the stock was a steal (don’t we all), I loaded the boat when the stock began to trade again. Over the years ahead the share price went to $3. From thereon in nothing went right (perception-wise) and its share price plummeted. It fell all the way back to 46 cents, rallied to a buck or so, and then was taken over by Golden Minerals on a 20 to 1 basis (1 GM share for 20 ECU shares).

The logic of the merger made sense. ECU has a world class precious metals deposit in Mexico which was not being developed properly … partly because it was cash starved and was diluting itself into oblivion. Golden Minerals had plenty of cash and its management is known to be first rate, having the experience to develop what they already had in South America and now in Mexico.

Great, right? Well the share price of GM then dropped to $5.23, which was close to a 75% drop in its value. What a nightmare! There are some out there who believe it was targeted by The Gold Cartel because of my GATA role. Others believe it was just part of a hedge fund shorting program. Whatever the reason, the shorts won the battle, burying the former ECU shareholders and the Golden Minerals shareholders in the process.

However, it now appears, finally, the tide has turned. After making a high this morning of $8.69, GM closed today at $8.27, rising around 60% since making a very recent $5.23 low. Word to me is that at last glance there was a "known" short position of 2.5 million shares. The total short position is most likely FAR greater than 2.5 million. I said the shorts "won." They have so far, but ONLY if they cover their shorts soon and before the GM share price goes back to where it should have been all along. The question is, how do they do so without driving the share price sharply higher? We shall see.

Anyways, I am in the Eric Sprott, John Embry camp in that I think the price of silver is going to go bonkers and that the share prices of quality silver producers will do the same.

The old high of Golden Minerals was around $30. There is no reason not to believe its new share high price will not triple that old high in the years ahead (rising to $90) as the prices of gold and silver SOAR.

Golden Minerals stock chart:

http://www.goldenminerals.com/stockcharts.php

This is not investment advice but a roller coaster tale. The good news is there are a number of precious metals stocks out there in a similar boat. If you own one, now is the time to pay close attention, not throw in the towel … that is if they have the goods and the low share price makes no sense … not when we have a mania ahead of us in the gold/silver share sector.

http://www.goldenminerals.com/press.php) was issued January 11, 2012 and discusses enhancements that the company made to their gold and silver production in Q4 ’11. Additional improvements in mine development and ore recovery should allow Golden Minerals to expand production throughout 2012 and become operationally cash flow positive by mid-year 2012.

Furthermore, AUMN plans to expand the size of the existing sulfide mill from 320 to 650 tpd. Along with "operational improvements to the existing 500 tpd oxide plant could result in annual production rates of up to 2 million ounces of silver and 29,000 ounces of gold by 2013."

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Wistar is very sharp as is John Hathaway, whom I have not seen since he came to Dallas about a decade ago. However, his top aide, Doug Groh, came to Gold Rush 21 at our conference in the Yukon in August of 2005. Knock On Wood here, but I am hoping what Golden Minerals has done so far is just the beginning of the "terrific short squeeze." Now that would make my day. On that note, Dave from Denver notes "of possible interest":