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-- Posted 28 February, 2004 | Digg This Article
FRIDAY, Feb 27th, 2004
This week's report lists 95 silver stocks. There are 29 silver stocks that list reserves, resources (and exploration potential.) which I calculate by using my "ounce in the ground" forumula. There are 47 explorers. There are about 19 additional "silver" stocks with incomplete information. Additions & Changes from last week are in bold.
If you are an Accredited or Sophisticated investor and want information I may find out about private placement opportunities in some of the very best silver stocks in my opinion, (This is not a solicitation for any stock, and I'm not brokering any securities) email me with PP in the subject field: jasonhommel@yahoo.com
I can't tell you exactly which silver stocks to buy several reasons. First, I'm not your broker. Second, too many people ask. Third, if I told you what I was buying as I was buying it, you'd buy, and push the price up against me.
The best I can do is tell you where I have already put my money. I offer a monthly "look at my portfolio". Try it for a month, and see if it works for you. I do not issue recommendations, and I don't list number of shares or the size of my portfolio, but I will show the top investments in my portfolio, by rank, updated monthly.
Price: $29.95/month or Price: $295.00/year
To order: http://www.goldismoney.com/available-reports.html
To read about my religious bias, see my other website, bibleprophesy.org There are two essays near the top of the page that explain why I believe the entire world will return to using gold and silver as money again before the end times. Hint, see Ezekiel 38.
If you want to receive an email notice of when and where this FREE weekly report is published, sign up at goldismoney.com Anyone who signs up will also get a FREE e-book that explains the bullish case for gold and especially silver. If you have studied the silver market at all, then the time has come that you ought to be a teacher, and you ought to explain the silver story to all who will listen. goldismoney.com is designed to help spread the word. I suggest you email the link to your address book.
Last week, I mentioned reuters as a source of gold and silver prices. Reuters.com no longer posts prices for gold and silver.
Kitco reports silver at $6.70 as of Friday, 2:43 PM West Coast US, which was used to calculate the following figures. The CAN $ / US $ conversion factor is .7495. I will use .75 for ease.
How to read the following table:
Stock Symbol that works at Yahoo! Finance (Company name) / Silver oz. "in ground"** for 1 oz. silver's worth of stock. / valuation price change since last week relative to silver price change (and stock dilution, and resource changes, if any) / additional comments (EXPT is "exploration potential")
- HL (HECLA MINING CO) .41 up --current producer (gold bonus) cash rich.
- ABX (BARRICK) .95 --infamous hedger (18 mil oz. gold hedged, 3 yrs production)
- CDE (COEUR D'ALENE) 1 even --current producer, (gold bonus) in debt.
- IPOAF.PK (INDUSTL PENOLES) 1.6 down --current producer, mostly family owned.
- * CFTN.PK (CLIFTON MINING) 3 up -- (67 EXPT) (colloidal silver patent bonus)
- SIL (APEX SILVER) 3.1 even --large zinc bonus, low grades, cash rich--$200 million!
- MFN MFL.TO (MINEFINDERS) 4.2 down --significant gold bonus, $35 mil cash on hand.
- PAAS (PAN AMERICAN SILVER) 4.6 up --current producer, in debt.
- * CZN.TO CZICF.PK (CDN ZINC) 4.7 down --large zinc bonus, high grades, low start up costs, great EXPT
- GRS GAM.TO (GAMMON LAKE) 4.9 down --current producer, owns 26% of Mexgold
- ECU.V ECUXF.PK (ECU SILVER MINI) 4.9 down --(13 EXPT) --50% gold bonus
- KBR.V KBRRF.PK (KIMBER RSCS) 5.2 down A one property company, with exploration potential.
- FSR.TO FSLVF.PK (FIRST SILVER) 5.2 down --current producer, (not profitable '03 3rd q.) unhedged
- WTZ WTC.TO (WESTERN SILVER) 5.3 down -- (22 EXPT) large mine development cost.
- * TM.V TUMIF.OB (TUMI RSCS) 7.25 down -- (15 EXPT) recent bonanza grade silver discovery
- SSRI (SILVER STD RSC) 6.7 down --multi-property company, understands silver story
- ORM.V OREXF.PK (OREMEX RES) 8.9 down (37 EXPT)
- MGR.V MGRSF.PK (MEXGOLD RSCS) 9.92* down (*exploration target) -- bonanza grade discovery on Jan 13th
- * SRLM.PK (STERLING MINING) 10.3 down --(28 EXPT) acquired the Sunshine in Cour d'Alene
- FAN.TO FRLLF.PK (FARALLON RSCS) 12 down --(20 EXPT) low grades, silver 1/3; also gold & zinc bonus.
- * EXR.V EXPTF.PK (EXPATRIATE RECS) 13 down --significant zinc bonus 60% zinc, 25% silver
- HDA.V (HUSIF?) (HULDRA SILVER) 16.4 down --very tiny, no debt, zinc bonus, low start up costs.
- * ADB.V ADBRF.PK (ADMIRAL BAY RSCS) 16 up --actively expanding resources. (Huge gas bonus)
- * SVL.V STVZF.PK (SILVRCRST MINES) 17 down --(32++ EXPT) --(Silver in Honduras) ++ acquired silver props.
- RDV.TO RDFVF.PK (REDCORP VENTURE) 20.5 down --60% gold bonus
- * ASM.V ASGMF.PK (AVINO SILV GOLD) 19 down --owns 49% of the Avino+ 4 other silver props. (silver bonus)
- CHD.V CHDSF.PK (CHARIOT RSCS) 20 down (explorer, with inferred resources)
- * MNMM.OB (MINES MGMT) 23 down --60% copper bonus (low grades), start up cost ~ $250 mil
- UNCN.OB (UNICO INC) 55 down --lease expiring on largest property, June 1 2004.
* = I own shares
Explorers (by market cap):
- III.TO IPMLF.PK (IMPERIAL METALS)
- EZM.V EZMCF.PK (EUROZINC MINING)
- * IMR.V IMXPF.OB (IMA EXPL)
- TVI.TO TVIPF.PK (TVI PACIFIC) --current producer of a dore silver bar 96% silver, 4% gold
- * FCO.TO FCACF.PK (FORMATION CAPTL) Cobolt (and Sunshine silver refinery)
- MCAJF.PK (MACMIN LTD)
- * CDU.V CUEAF.PK (CARDERO RSCS) 46-79 "exploration potential"
- * AOT.V ASOLF.PK (ASCOT RSCS) -- owns percentage of Cardero, CDU.V
- MAG.V MSLRF.PK (MAG SILVER)
- CAUCF.PK (CALEDON RES)
- MAI.V MNEAF.OB (MINERA ANDES) (gold bonus)
- * OTMN.PK (O.T. MINING) very large exploration potential
- * NPG.V NVPGF.PK (NEVADA PAC GOLD) 34-176 "exploration potential" (owns 1 silver property, 10 gold properties)
- * MMGG.OB (METALLINE MINE) --zinc/silver (historic high grade silver) (low cost revolutionary oxide zinc process)
- MMM.TO MMAXF.PK (MINCO MINING)
- IAU.V ITDXF.PK (INTREPID MINRLS) 13 "exploration potential"
- QTA.V QURAF.PK (QUATERRA RES)
- EDR.V EDRGF.PK (ENDEAVOUR GOLD)
- DNI.V DMNKF.PK (DUMONT NICKEL) exploring Clifton's property
- SML.V SMLZF.PK (STEALTH MNRLS)
- MAN.TO MMALF.PK (MANHATTAN MNRLS) --Protests in Peru, and Peru revoking the property rights, hurt the price.
- * NBG.V NBULF.PK (NEW BULLET GP) 33 - 95 "exploration potential"
- SDR.V (STROUD RSCS)
- * FR.V FMJRF.PK (FIRST MAJESTIC) --(15 EXPT) Bought a former silver producer. Acquiring silver properties.
- * CBE.V CBEFF.PK (CABO MINING) --Historic Silver and Cobalt district
- EXN.V EXLLF.PK (EXCELLON RSCS)
- EPZ.V ESPZF.PK (ESPERANZA SILVR)
- BCM.V BCEKF.PK (BEAR CRK MINING)
- NJMC.OB (NEW JERSEY MIN)
- HGM.V HOGOF.PK (HOLMER GOLD)
- SPM.V SMNPF.PK (SCORPION MINING)
- CHMN.PK (CHESTER MINING)
- * KG.V KDKGF.PK (KLONDIKE GOLD)
- GNG.V GGTHF.PK (GOLDEN GOLIATH) --Historic silver district in Mexico
- MMG.V MMEEF.PK (MCMILLAN GOLD)
- * KRE.V KREKF.PK (KENRICH ESKAY)
- LEG.V LEGCF.PK (LATEEGRA RSCS)
- SHSH.PK (SHOSHONE SILVER)
- BGS.V BLDGF.PK (BALLAD GLD SLVR)
- SRY.V (STINGRAY RSCS)
- EGD.V (ENERGOLD MINING)
- PCM.V (PAC COMOX RES)
- BBR.V BBRRF.PK (BRETT RES)
- TUO.V TEUTF.PK (TEUTON RES)
- ASLM.PK (AMER SILVER MINI)
- ROK.V ROCAF.PK (ROCA MINES INC)
- CBP.V CPBMF.PK (CONS PAC BAY MIN)
* = I own shares
** = "in ground" counts all "silver oz. in the ground" as the same, but they are NOT EQUAL. Some are more certain and others are more speculative. Some are higher grades, some are lower grades. They range from most certain to least certain such as: "proven & probable reserves," "measured, indicated, inferred resources." This single number next to each stock symbol above represents the approximate number of ounces of silver in the ground you are buying title to when you invest the equivalent of one ounce of silver by buying shares in the company at current prices. (It does not include zinc, or copper, or lead, but it does include gold at a 1:10 ratio of gold:silver.)
At goldsheetlinks.com, they add 100% of proven & probable reserves, but only 70% of measured & indicated resources, and only 50% of inferred resources. I don't do that. I count them as all the same.
To quickly "tab" down to the company you are interested in, note the symbol. Then hit "control-F" to "FIND" the symbol below.
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WEEKLY COMMENTARY (All new in this section):
Silver was very volitile this week, and ended at $6.70. It seems the market is very unsure of itself, and this means that great opportunities exist for those of us who are more sure that silver is headed up. It seems people are very eager to sell their silver shares the minute silver turns down, and as if people are very eager to buy in to all silver shares the minute silver hits a new high. So the silver shares are even more volitile than silver! The way to make money in the mid term by trading is to do the opposite of the crowd, which would be to sell at the peaks, and buy back in when silver falters. Unfortunately, if you sell out of silver shares at $6.90, and then if silver screams upward to $8.00-$10/oz., you are left behind. So, in the end it's best to hold on to your silver stock positions, and sit tight. Or, if you must trade, try and trade out of the silver stocks that are running up too fast, (or are overvalued), and trade into those silver stocks that had an odd down day (or are undervalued).
On Monday, I sent out a press release. "Silver Stocks Rose 314% in 2003, Reports GoldIsMoney.com"
On Tuesday, I wrote an article that was very well received. "Major Frauds of the U.S. Monetary System" Within a day, I received about 50 emails, many saying that this was my best article ever.
Note: Silver at $6.70, up from a low of about $4.50 in June, 2003 (up 48%)
Copper at $1.35/lb, up from a low of about $.80 in June, 2003 (up 68%)
Zinc at .51/lb, up from a low of about .35. (up 45%)
I maintain that silver should rise the fastest, since it will have monetary demand, and copper and zinc will not ever have monetary demand. Nobody will ever take a pound of zinc to the store for its monetary value to buy bread. Thus, silver's meteoric rise has not yet begun!
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Morgan Stanley's Byron Wein is their "Senior Strategist for U.S. Equity Research". Nice title. He's now bullish on silver, even though silver is not an "equity". How nice! Sounds a bit like Warren Buffet's apology for buying silver, that he could not find anything else that was cheaper with better fundamentals. Byron Wein has a list of 10 surprises for 2004, and his view is that each has a 50% chance of happening for the next year. (But in fact, his calls are right more often than 50% of the time.) Here's one on his list for 2004:
Silver becomes metal of choice: In spite of favorable finacial markets, an increasing number of investors begin to question the soundness of stocks, bonds, and currency. Silver becomes the precious metal of choice. While gold ascends to $500 an ounce, silver goes to $8.00. More institutions adopt precious metals as an asset class to hedge against currency depreciation.
That last line says it all! He may well have written, "paper money is fraud, and people will be buying real money, which is gold and silver, and especially silver". I have said that monetary demand is everything, and it looks like this will be the year that we will have it again in silver!
Interestingly, his price predictions for gold and silver are a ratio of 62.5:1. (500/8=62.5). Obviously, if silver becomes the investment of choice, over gold, then the current ratio of 59 will go lower, as silver rises faster than gold. A more apt prediction more in line with his comments of "silver becomes the metal of choice" would be a prediction for a ratio of 50:1 or 40:1 or even better. With gold at $500, a 50:1 ratio implies a silver price of $10/oz., and a 40:1 ratio implies a silver price of $12.50/oz. I wonder if he just forgot to do the basic seventh grade math on this???
As an aside, it is often reported by GATA that Morgan Stanley is a heavey seller of silver. On the other hand, GATA also reports that Morgan Stanley is a heavy buyer, at times. It was theorized that Morgan Stanley is a silver short. But I do not know what Morgan Stanley's position in silver may be. Anyway, it is very interesting that Morgan Stanley issues a bullish recommendation for silver. Some have also theorized that the lead short has mostly covered, and has left other silver shorts to hold the bag. I wonder if Morgan Stanley may have been the lead short, and is now out? But I must admit this is pure speculation, and I wonder if anyone will ever know, unless there is testimony after the other silver shorts lose big? Only the other shorts, or the COMEX officials, would know who else was the lead short.
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Mineweb had a strange article with a strange title on silver this week: Does silver demand need slaking?
I think the article was appropriately titled, since the title is as confusing as the article. Is the title saying that silver demand needs to be cut back (moderated, abated), or is the article saying that silver demand needs to be met? In other words, the title contains a value judgement word, "need", that changes depending on the definition of the word "slaking", and the word "slaking" has two definitions that imply two entirely different things! For example, is the title suggesting that people are demanding more silver than is good for them, and that investment demand should be cut back, or is the title suggesting that the demand is just fine, but that the problem and need is to fill that appropriate demand? In other words, is the title saying that demand should be cut back, or that supply should increase? The first sounds bearish for silver, as if the silver bulls are making a mistake, the second sounds bullish for silver as if there is inadequate supply...
The article quotes Andy Smith at length. Following the article are good rebuttals by Sharefin of http://www.sharelynx.com/ which is a great place to go for all sorts of gold and silver charts.
Andy Smith, quoted in the Mineweb article, is well known as an analyst for Mitsui Metals. http://www.mitsui-gold.com/ If you go to the Mitsui website, and click on "about MGPM", you will read that they boast the following: "As the market deregulated and the Tokyo Commodity Exchange began to introduce precious metals futures contracts, Mitsui was there as a founding member and is today, the biggest trader on this exchange." Further, they continue, "Mitsui was one of the first bullion dealers to provide gold loans and hedging facilities in Australia, a pioneer in exploiting the gold forward market, with Mitsui's first deal being in 1985."
They are nearly boasting that they are short the precious metal market. The profitable trade in futures contracts since about 1985 was being short. Helping miners in Australia to hedge, and providing gold loans would mean that they have the miners' gold pledged to them on the long side, which means that Mitsui would be shorting gold on their own to "balance" the risk. This is the game the bullion bankers have been playing, a game that was profitable as the gold price went down. The mining companies that used such hedging contracts would be locking in higher prices (profitable for the miners), and the bullion bank, who went short, would be selling gold at higher prices, and buying back at lower prices down the road. However, the profits are now gone as the gold price rises. Now, the miners who hedged and locked in prices are the losers. And now, the bullion bank is short gold that is rising.
Elsewhere, in the Commitment of Traders Report for the TOCOM, the Japanese commodities market, I have read that Mitsui is the largest commercial dealer, and also, the COT reports that the commercials are the ones holding the bulk of the short positions.
Therefore, I believe Andy Smith is biased. I'm going to analyse a few of his bearish comments for silver, to see if they have merit worth paying attention to.
Smith’s presentation, delivered on Tuesday, reminded the audience that Warren Buffet lost his silver battle with the Indians back in 1998. The Sage of Omaha bought a year’s worth of Indian silver demand, driving up the price, which prompted Indians to swiftly dishoard.
“An epic encounter: 1 billion Indians versus Warren Buffett as Custer. Who won? Look at the price,” says the ever-irreverent Smith.
Andy Smith's reference to the Indians is a reference to the nation of India. The comparison to Custer is weird, since that's a whole different group of "Indians". First of all, nobody knows that Warren Buffett sold his silver. Warren has not reported that he has sold. So, Warren, an extremely long term investor, has not lost yet. Second, I don't think India ever exported huge amounts of silver at any time during or after Warren's silver purchase. Andy continues:
What’s more, mine output has paid no attention to prices, which is why cumulative production now totals 43 years of demand, far more even than gold at 32 years.
I agree with the first part, that mine output does not seem very correlated to prices. This means that supply is inelastic, and cannot be expected to ramp up significantly if the silver price goes up. Supply certainly didn't spike up in 1980 when silver rose ten-fold in price. This inflexible supply means that we cannot expect significant mine supply to depress the price after silver rises in price.
The second part of what Andy says, or what mineweb reports, is unclear. What is "cumulative production"? What is "43 years of demand"? These kinds of statements are totally useless. They sound factual, but they are not factual at all, containing no statement of fact whatsoever. I'm not sure if Andy was being unclear, or whether mineweb is just engaging in poor reporting.
It sounds bearish. It sounds as if we have 43 years worth of demand stored up as "cumulative production". This is not the case, and cannot be what Andy is saying. Or, it also sounds as if Andy is saying that annual production is 43 times greater than annual demand, but this is also not what he is saying. Annual demand is about 800 million ounces, and annual mine supply is about 550 million ounces.
Is Andy speaking of "cumulative production" since the beginning of time? Perhaps. I have read from various sources that cumulative production in the last 6000 years of human history is estimated at between 30 billion and 40 billion ounces for silver. Now, 800 million ounces (one year of demand) x 43 is 34.4 billion ounces, which is within that range. So, is Andy saying that 43 years of silver demand... has demanded, or will demand, all of silver produced in human history? I think that's about right, and I don't see how that is bearish. That means that there is very little silver left, since it has just about all been consumed by industry and jewelry in the last 60 years or so. Andy continues:
And it gets more dreary. Poor demand is compounded by long-run under performance relative to inflation. “In today’s money silver’s annual peak in 1980 at just over $40 was only half its summit in the mid 1400s, as many of us remember. Columbus should have gone short, for about 600 years,” Smith fires.
Wait a second. "More dreary"? "Poor demand?" Andy's prior comments were bullish if you look at the numbers. And "Poor demand"? I have just established that demand is up, over supply. What "poor demand"? Andy has no numbers to back up that statement!
Next, Andy seems to suggest that we all remember silver prices from the 1400's, which makes him sound like he is insane. Perhaps he is referencing the 600-year chart on silver prices that has been making its way around the very well informed silver investors on the internet. See here: http://goldinfo.net/silver600.html
But if that is the case, then Andy's statement is just wrong. Correct logarythmically, but not arithmatically. The peak silver price in the 1400's, adjusted for inflation, in constant 1998 dollars, is $806/oz. Therefore, $40/oz. is not half that peak price, it is less than 1/20th of the peak price.
Andy's argument about "long-run under performance" is that since silver is now so cheap, there is no reason for the price of silver to return to historical norms. Andy's implication is that the "poor performance" will continue forever, with silver continually getting cheaper and cheaper. Andy's argument has to ignore the very good performance of silver recently, the 50% rise in price since $4.50/oz. since mid 2003.
The alternative to that argument is that the chart shows that silver is now priced cheaply, and should now move higher. Andy continues:
Those who long for silver to re-establish its “rightful” ratio with gold also have nothing empirical to lean on – unless you track world shark attacks, in which case the correlation is 0.62. Soybeans are also a reasonable predictor.
Andy's comments here are insane, and are a complete non-sequitor. His argument does not follow what he is saying. We, who believe silver will return to its historic ratio to gold, of between 10-15 oz. of silver to 1 oz. of gold do have something empirical to lean on, the empirical and historical data! empirical: 1. originating in or based on observation or experience.
Finally, the rest of Andy's comments are all bullish for silver.
There is also some good news though. Central banks long ago quit their official silver holdings. “Silver decoupled from gold, and has hovered around ‘commodity purchasing power parity’ ever since. . . Silver inventory has largely been dispersed, privatised already. So coralling lenders is harder, lease rates are less predictable and backwardations more frequent than in gold, writes Smith.
Likewise, silver gets consumed more than gold precisely because it is cheap. “Cheap and tiny - enjoy the ride. A $6/oz tag also gives silver ‘casino appeal’ - its price volatility is higher, almost twice gold’s. Which gets to the essence of commodity ‘investment’ - timing.”
Also, when you consider hedging, gold and silver are too different stories. “Again, silver has taken its biggest hit. Interest rates are now at their lows, gold de-hedging nearer an end; when rates rise re-hedging by gold miners should see silver outride gold.”
Wait, it gets better. Everyone is chasing the China commodities boom, but what happens if there’s a bust? Not much to silver which has the least exposure to Chinese demand among leading metals.
The upside is that silver still has room to increase 8 times to its last major peak (1980); gold only twice.
The real upside is that silver today is in much tighter physical supply than in 1980's peak. There is much less available, less by perhaps a factor of ten or twenty times less. Back then, I estimate that the world had about 1,000 million to 2,000 million oz. of silver in deliverable form in known inventory stores. Today, we probably have about 100 to 50 million ounces. That means the ultimate price this time should far outstrip the peak of 1980.
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General Commentary on Silver (slightly modified from last week):
As the New York Times, January 11, 1859, page 2 said---
"It is well known that the most colossal fortunes the world ever saw have been based on silver mines..."
--quote found by Charles Savoie
For news on the New Hampshire Sound Money Bill, that proposes to use U.S. Treasury minted Silver Eagles and Gold Eagles as money see:
http://www.nh-inews.org/
http://veritasradio.com/
Current status of the NH bill:
The bill will live until the November elections. It'll have a different #,
but we now have 6 months or so to get EVERYONE we need on board.
Thanks to you for your efforts. Now, the fund raising part begins
so we can take it to the other states ! More on that later.
For now - V I C T O R Y is in sight !
The following dealers have, or regularly keep, over 100,000 oz. silver bullion in inventory: Minimum order: 100 oz. gold or 5000. oz. silver: (These are not places to call for small retail orders. For smaller orders, call Greg Westgaard, 1-800-328-1860 Ext. 8889, and tell him Jason sent you.)
American Coin and Vault 5523 North Wall Street Spokane, WA 99205 (509) 326-7512 California Numismatics http://www.golddealer.com/ Richard Schwary 1-800-225-7531 Engles Coin Shop Minimum order: 100 oz. gold or 5000. oz. silver.(317) 875 0614 3520 Founders Lane, Indianapolis, IN 46268 Miles Franklin Ltd. http://www.milesfranklin.com St. Louis Park, Minn. Bob Sichel 1-800-814-3224 They believe their exclusive wholesaler is one of the top 5-6 wholesalers in size in N. America.
The easiest way to buy Comex Silver is through a precious metals brokerage firm such as HSBC bank, or http://www.fidelitrade.com/ that charges around 1% commission, plus delivery fees of about 2-3% depending on how far to ship. Or you could open a commodities trading account with any of the major brokerage houses who are most likely the bullion banks, and take delivery of your contract. There are several problems with this method. First, is the most obvious. These are the paper contracts that are controlling and suppressing the price, that I believe must one day default. Second, the bullion banks, since they are the ones who are likely short silver, will try their hardest to talk you out of placing an order. I have actually had several bullion banks turn me down, and not open a commodities trading account for me when they heard I was going to take delivery of several futures contracts! Their hypocritical excuses are amazing! They will say on one hand that their comissions are too low, and thus, it's not worth their time to open the account for you. And then, they will turn around and also say that you don't want to order silver bullion because the commissions will kill you! Unbelievable hypocrites those shorts! They will also try to scare you with "assay fees" that will be assessed if you try to return 1000 oz. bars to the exchange! But they won't tell you what those fees may cost! I've heard the assay fee is FREE if you use Brinks in LA!
My 2004-2009 price predictions for gold and silver:
2004: $595/oz. gold, 50:1 ratio = $12/oz. silver
2005: $1011/oz. gold, 30:1 ratio = $34/oz. silver
2006: $1719/oz. gold, 10:1 ratio = $172/oz. silver
2007: $2923/oz. gold, 5:1 ratio = $ 585/oz. silver
2008: $4,969/oz. gold, 1:1 ratio = $4969/oz. silver
2009: $8448/oz. gold, 5:1 ratio = $1698/oz. silver
2010+: infinity dollars/oz. gold, infinity dollars/oz. silver.
I calculate the gold price rise by guessing that by 2009, M3 will have a "gold-value" like it did in 1980, which is to say, M3 was worth 2 Billion oz. of gold or less. It also assumes M3 will about triple in that time. These figures are conservative, because I see no reason that M3 should be valued more than the gold the U.S. actually holds, which is a mere 261 million oz., not billion. Today, the M3 value is $8870 billion / $425/oz. = 19 billion oz. of gold M3 could buy in theory. The silver:gold ratio is also a very, very vague guess, reflective of monetary demand chasing silver, which is more scarce than gold in above ground, refined form. I have no idea when the ratio of 15:1 will be exceeded, I'm just totally guessing. I suppose it could happen this year or next month for all I know. Of course my real price targets are infinity dollars per oz. for both gold and silver when all is said and done, I just don't know how long that will take, nor what year it will be. But my point in producing the price predictions is to show my bullishness for silver and gold.
Let me say how important it is for silver stock investors to own physical silver. There is $ 334 million dollars worth of silver in the registered category available for delivery at the COMEX. The 59 silver stocks on my list, for which I have information available to calculate market caps, add up to $7090 million as of Dec. 5th, 2003. If silver stock investors move 5% of their silver stock holding to physical silver in the next few weeks, that would be $350 million dollars worth of physical silver, and thus, the silver price would probably hit $10-20/oz. within a few days. And if silver stock investors try to move 20% into physical silver, the silver demand will end the COMEX manipulation tomorrow. We don't need anyone other than ourselves to make "the big breakout" happen at this point.
I wrote an article predicting that Silver Companies will buy silver, and urging Silver Companies to buy silver with their cash, to use silver as money, and sell silver as needed for expenses. See http://news.goldseek.com/GoldIsMoney/1069879327.php
That article is now having an effect! It is being discussed by several large "cash rich" silver companies, who are seriously considering the idea of holding their cash in the form of silver.
A great overview on silver: Douglas Kanarowski's 78 Approaching Forces For Higher Silver Prices
See the 600 year silver chart to see how undervalued silver really is:
http://goldinfo.net/silver600.html
Look at the summary of the world silver survey by GFMS Limited on behalf of The Silver Institute :
http://www.gfms.co.uk/Publications%20Samples/WSS03-summary.pdf
Note, there is virtually no monetary demand. Note, the 2002 mine production (585 mil oz.) is greatly exceeded by industrial, photo, and jewelry demand. (838 mil oz.). Note the chart on page five, "Supply from above-ground stocks".
The difference between mine supply and industrial demand was met by a combination of three factors: 1. Government selling, 2. Private selling, 3. Recycling
U.S. government selling is ending, as their stocks have run out, or will run out. This factor will reverse, because the U.S. government will need silver to continue their coin program, and/or need silver when they wake up and decide they need to replenish their strategic stockpile for domestic security. Silver is a war material. China's selling of silver will also likely turn into buying, as China will need silver for continued industrial development, or when they also lose faith in the U.S. dollar.
Private selling has been rapidly shrinking and is now almost ended, and should turn into buying, and become monetary demand. Monetary demand is everything in the silver supply / demand situation. It's not now. Now, it's nothing. But it will become something incredible, because the dollar is dying.
The following is a "must read": Ted Butler's best ever explanation of how silver is manipulated lower than it should be.
http://www.investmentrarities.com/11-04-03.html
Sign the silver petition to stop the manipulation at the COMEX:
http://www.PetitionOnline.com/comex/
Ted correctly points out that a lower price creates excessive demand from consumers. However, Ted Butler does not point out, and neglects to mention, that a perpetually low price also creates lack of demand from investors who are "trend investors".
I think most silver experts over-analyze all the supply and demand factors of the silver market. No factor is more important than monetary demand. The force of photographic demand is like a light breeze compared to the hurricane or tornado of monetary demand. Monetary demand is everything.
Consider the gold market for a moment: Even short selling at the COMEX is nothing compared to monetary demand. The short position most certainly helps to depress the price of gold as the short position is growing larger. However, it adds fuel to the fire if there is short covering, and thus, it can boost the gold price later. But the commercial short position on the COMEX is next to nothing compared to the non-reported "over the counter" trading that is done that does not appear on the COMEX.
(Numbers in metric tonnes, 32,152 oz. per tonne.)
870 tonnes -- the paper position at the COMEX, 280,000 contracts for 100 oz. each.
5,000 tonnes -- the official number admitted that the central banks have sold.
15,000 tonnes -- the number GATA research shows that central banks have sold / or leased.
30,000 tonnes -- the number of official central bank gold, minus either the 5000 or 15,000 tonnes.
145,000 tonnes -- all the gold mined in the history of the world.
2,600 tonnes -- annual mine supply
4,000 tonnes -- annual demand
And all of that is nothing compared to the amount of dollars out there that exist that could buy gold. $20 trillion bonds, $9 trillion M3 = $29 Trillion. A mere 1% is $290 Billion, which, at $500 /oz. is a massive demand of 18,039 tonnes. Do you understand what that means? That means that far, far less than 1% of dollars, in either bonds or M3 can buy gold, because there simply is not that much gold available.
Long before 1% of U.S. paper dollars tries to buy gold, gold will be going up well over $1000/oz., and silver will be headed up over $50/oz.
To scare away investors--that is the entire reason gold and silver are manipulated in the first place. Only the trend investors can be deceived. The problem is that nearly everyone is a trend investor. So few investors understand value. If people knew the facts and used their brains, the available above-ground refined silver would be gone by tomorrow, and the price would be well over $20-50/oz. But don't trust me, follow the urls and check the numbers:
1,000,000,000,000: 1 Trillion dollars
1,000,000,000: 1 Billion dollars
1,000,000: 1 Million dollars
$33,000,000,000,000: World bond market yr end, '01: http://tinyurl.com/vr7u $20,200,000,000,000: U.S. bond market, yr end, '02: http://tinyurl.com/vr7g $11,700,000,000,000: U.S. stock market, yr end, '02: http://tinyurl.com/vr7g $11,038,000,000,000: U.S. annual GDP, 3rd q.'03 est. http://tinyurl.com/vr9y $8,879,000,000,000: M3 (money in the banks) Nov. '03 http://tinyurl.com/vra0 $7,001,312,247,818: US debt, 12-31-'03 http://tinyurl.com/bbp $2,212,000,000,000: U.S. annual budget 2003 $1,860,000,000,000: World gold, 145,000 T @ $400/oz. http://tinyurl.com/vrcc $554,995,097,146: U.S. budget deficit, ending fiscal year, 09/30/'03 http://tinyurl.com/bbp $274,000,000,000: Market Cap of Microsoft http://tinyurl.com/vrcn $180,000,000,000: debt of Ford Motor Co. http://tinyurl.com/vrd1 $104,400,000,000: US gold, 261 mil oz., @ $400/oz. http://tinyurl.com/vsr9 $100,000,000,000: all the world's gold stocks (estimated?) $7,090,000,000: all the world's silver stocks (59 of them on this list, as of Dec. 5th, 2003) $ 355,000,000: 53 mil oz. of registered COMEX silver @ $6.70 /oz. http://tinyurl.com/vrcw
So, what do all those stastistics mean?
For a while I was using M3 and dividing that by the US gold (261 million ounces), which implies the us dollar is 84 times more valuable than it should be, and that gold should hit $34,000/oz. after the fraud is destroyed. Today, I realize I need to add in the Bond market, because bonds are an asset class designed to siphon away and replace real money, which is to say, gold. This gives a price of about $111,111/oz. for gold. At $ 430/oz, this implies that US bonds and paper currency are 258 times more overvalued than gold.
Gold is overvalued relative to silver, because at current prices, it takes 59 ounces of silver to buy 1 ounce of gold. Historically, this ratio was 15 or 16. Given the silver shortage, this ratio will hit 10:1 or 5:1, or even 1:1. Thus, gold is perhaps 66 times more overvalued than silver.
Silver is overvalued relative to certain select silver stocks, perhaps by a factor of 3 or 10 or 20 to one.
Thus, if you multiply all those numbers, 258 x 59 x 10, You will see that bonds and currency are overvalued relative to select silver stocks by a factor of 152,000 to one. In other words, if silver stocks reach their true value, and paper currency disappears as it always does, then you might expect certain silver stocks to go up in relative value by a factor of 152,000 times more than they are worth today. By that time, you should definitely sell the silver stocks, and buy gold.
Can silver stocks really appreciate so much? Is there historical evidence for such a crazy thing? Yes.
See http://www.sterlingmining.com/old.html
Excerpt:
"CDE rose from penny stock status (.02 in 1967) to an NYSE-listed, $60 per share stock in 1980. In fact, the average share on the Spokane Stock Exchange rose in value nearly 16000% (yes, sixteen THOUSAND percent), as America could not get enough of silver and silver stocks."
CDE rose by a factor of 3000, or 300,000%, and by 1980, the metals boom was stopped short, and paper money's death was postponed. If paper money dies a death that lasts a generation world-wide, then even greater gains should have been expected.
For this reason, a wise silver stock investor should NEVER sell silver stocks for paper cash. A wise silver stock investor who looks for value would never sell a fairly valued silver stock for an overvalued silver stock that traded for hundreds of thousands of times more value than it should be. Likewise, there is no excuse for a silver stock investor to have any cash or money market or bonds in his portfolio for any reasonable length of time, except for when selling one silver stock to raise the cash for another silver stock, or for when you need to raise the cash to buy silver, or a private placement in another silver stock.
So, if you want some fairly liquid alternatives to cash, in case you don't know what other silver stocks to buy at the time, here they are:
1. Buy silver. You can hold silver in an IRA.
2. Buy CEF. Central Fund of Canada, ticker symbol CEF. It's gold/silver bullion fund. It has 50 oz. of silver for every 1 oz. of gold. The fund is fairly liquid, you can buy it as easily as any other stock, and is a good cash substitute. Unfortunately, given the current ratio, about 60% or more of the value is in gold.
3. Buy a fairly large cap silver stock, with fairly large volume, that is still fairly cheap on the list. SSRI is probably the best candidate.
----------
The sheer stupidity of big money not recognizing the value of the world's remaining silver is utterly shocking to the rational mind. Clearly, bond holders are utterly deceived, and totally unaware of the situation. All my readers should understand and know that bonds were originally invented to suck the capital and money (gold and silver) away from the people. Bonds today are a paper promise to repay paper. What a con game! Are bond holders conservative and safe? No, they are fools! There is nothing safe about holding a paper promise to receive more paper when we have been experiencing hyperinflation for the past two and a half years!
See my prior essay, " Inflation & Deflation During Hyperinflation "
And the fund investors who buy paper silver futures contracts instead of real silver are a very odd bunch of fools, for they should realize that nobody can deliver the 800+ million ounces of silver promised in the paper contracts and options that does not exist. It's like the paper longs are betting on the bank run happening, but they all are making sure they get at the end of the long line. Instead, they could go front and center, where there is an open window available where you can go and get physical silver, and nobody is there. Idiots! If you know a bank run is going to happen, and you are actually willing to bet on it, then go and withdraw your money before it is too late! Don't bet on it happening, which, if it does happen, your contracts will be defaulted on! Amazingly blind idiots. Wake up!
See also my prior essay, " The Moral Failures of the Paper Longs "
---------------
How bullish am I on silver? Here's an interesting way to put it: "59 times infinity" dollars per ounce.
I believe the dollar will eventually be destroyed, likely within my lifetime, hence the "infinity" part. I believe the ratio of silver to gold may be equal during a spike, when the market realizes that above-ground refined silver is more rare than gold. Thus, silver may outperform gold by a factor of 59 times better. Currently, the ratio is 59 ounces of silver can buy one ounce of gold or 59:1.
I may end up selling silver for gold, some at the 10:1 silver to gold ratio, some more at 5:1, and I would sell any silver remaining at a 1:1 ratio, that we may hit during a supply/demand crunch during a paper money collapse.
How we can tell if silver is leading gold, or if gold is leading silver? IE, which is going up more, faster than the other? The way you can tell is by looking at the ratio. If the silver:gold ratio is going up (say, from 60:1 to 80:1), then gold is moving up faster (because it takes 5 more silver oz. to buy an oz. of gold. If the ratio is going down (from 60:1 to 40:1), then silver is moving up faster. So, keep an eye on the ratio.
---------------
For a list of bullion dealers:
http://www.goldismoney.com/buy-gold.html
For a list of Brokers that handle Canadian issues and/or pink sheets:
http://www.bibleprophesy.org/SilverStockExtra.html
To track the 150 ticker symbols of the 90 stocks on this list at yahoo: (Updated on Jan 30th)
http://www.bibleprophesy.org/SilverStockExtra.html
To learn All about Canadian law, 43-101, about reserves and resources:
http://www.bcsc.bc.ca/Publications/mineral_projects_sept03.pdf
A good website that hosts posting boards for many of the smaller canadian stocks is stockhouse.com
Click on "Bullboards".
-------------
This is a list of primary silver stocks.
I count a company's ounces of gold as 10 oz of silver. Why? Because I have a very strong positive bias in favor of silver over gold.
Given my bias in favor of much, much higher silver prices, then, to me, the grades of silver are far less important than buying more oz. in the ground. More oz. in the ground at a lower cost is the most important consideration for me.
My method is simple. Cost per ounce in the ground. How much do you get (silver reserve totals), and how much does it cost (market cap)? The cost is the market cap divided by the silver reserve totals. Cheaper is better. Buy low, sell high.
Disclaimers, Warnings, and Advice: I have gathered the information below over the course of several months. I believe it is accurate to the best of my ability. I may have made mistakes. I probably did. I'm human. I have collected the information from public sources such as company web sites and public information found at yahoo.com to get the stock prices. This report in no way guarantees the accuracy of the information below, since the information may change at any time. The number of outstanding shares can change as a company engages in new share issues to raise more capital through private placements, or if outstanding warrants (and options) are exercised and converted into shares, or if shares are bought back. Shares can be consolidated, or split. The number of ounces of silver in the ground can also change, as these are often only estimates. The number can also change up or down, depending on drilling results.
This report is not investment advice. This report contains information that may or may not be up to date, and may be inaccurate. I urge you to contact the company and do your own research to verify the information contained in this report.
This report is not an offer to buy or sell any securities. I am not a broker. Only your broker can buy or sell securities for you.
I urge you to consult with your investment advisor to determine whether these kinds of investments are right for you.
I also caution you to be aware of your investment advisor's advice, they are sometimes paid to push things like mutual funds, bonds and other securities that may not be in your best interest to buy. Some investment houses are short physical metal, and thus, they may attempt to strongly discourage you from buying precious metal or precious metals investments. I believe that the propaganda machine in support of frauds such as bonds and the dollar is so strong, that they may even believe what they say when they give bad advice to avoid the safety and protection of precious metals. It is most likely that they simply do not understand the precious metals market as well as you do.
All total estimates of "ounces in the ground" can vary widely. There are "proven and probable reserves" which are the highest category of certainty which is obtained through many drill holes, and then at the least accurate, there are "inferred resources" which are hardest to estimate. Additionally, every miner always has "more silver properties that need to be explored, which probably contain more silver". For the purposes of this report, I have added all those numbers together. It is believed that all these "ounce in the ground" estimates can be profitably mined at $5-6 per ounce silver, or lower. Thus, I believe that when silver trades for $15/oz. or above, that all of these ounces can be mined at a substantial profit.
I may be wrong. (I probably make mistakes in every article, and there have been updates and corrections made each week, especially as prices change.)
Mining is a risky business. You need to be willing to sustain a total loss of your investment for various unforeseen accidents. Silver stock companies can do stupid things to shareholders such as take on debt, or issue more stock at too low prices which reduces the percentage of the company you may own (dilution). Yet, they need to issue shares to raise capital for drilling, and then an even bigger dilution to build a working mine. They may sell YOUR silver too cheaply, or worse, hedge the price of YOUR silver just as it begins to go up if they lock in a price which then proves to be too low if the dollar is destroyed. Mining is a risky business as estimates of assets in the ground can change. There is political risk and environmental risk. They can't franchise the business, are stuck in one location, are subject to government confiscation, or taxes, or union wage negotiations, and corporate looting.
Do your own research. Be responsible for your own investment decisions. Again, please, before investing in a mining company, call up the company, and speak either with the CEO or the Investor Relations contact person.
So, at the very least, check the company web site, read the annual reports, check my numbers, check my math, and email the company. That's what they are there for, to answer your questions, and to speak about the opportunity of the company. Don't trust everything you read over the internet. I am a biased source. I own silver mining stocks. And I'm not a broker, nor an investment advisor. I'm just a private investor trying to make sense of this crazy world, and sharing my information and thoughts on silver companies.
Surely, there are scammers in the mining industry in the past, and there will be scammers in the future. Remember the fraud of Bre-X. The new 43-101 compliance laws put in place after Bre-X will not prevent a "certified" geologist from lying if he feels lying will create a better payoff. The Bible warns, "trust no man", yet at the same time advises us to "cast our bread upon the waters", and to not issue "false allegations" against others. Physical gold and silver provide the "payment in full" as long as the coins or bars themselves are genuine and not fake.
This report may be copied, and transmitted by other people, and may become outdated by the time it reaches you.
I can't tell you how you should invest your money, of course. The reason is that I don't know how convinced you are of the silver bull market, nor do I know how soon you will be needing the money back, so I don't know how long you can wait to see results, nor do I know how much liquidity you need. Nor do I know the size of the money you have to invest. It is very hard to invest large quantities of money in a small market cap stock.
That being said, my investment strategy seems to be working for me, so far. And so, here is how I have valued the following silver companies to make my own investment decisions.
(Market cap is always converted to US dollars and denominated in US dollars because I divide by ounces of silver, which are also denominated in dollars)
The Market Cap is the usual tool to value a company. It is what the company "costs to buy" if you could buy the entire company, all the shares, at the latest share price. It is calculated by multiplying the share price, by the total number of shares that the company has issued. In reality, you could almost never buy an entire company at the price of the Market Cap, but only a small portion. Usually, even small buying pressure, such as trying to buy 1% of a company, can push up the price of a stock by up to 10-50% higher. In my reports, I list Market Cap in terms of millions of dollars as "$75 mil MC".
To calculate the Market Cap, I try to get and use the number of "fully diluted shares". A company creates shares when they sell them to investors in what are called "private placements", or "initial public offerings" (IPO). A private placement is done usually before there is ever an IPO. These usually consist of shares and warrants, sold for cash that the company will need to grow and expand.
The "outstanding shares" is the number of shares that exist out there if you count them all, and it does not count the warrants, which are like options. The investor can "exercise the warrants" which is a right, but not an obligation, to buy more shares from the company at the set price of the warrant.
If the company does well, and the stock price moves up, all the warrants will be, or should be, exercised and converted into shares, especially if they become "in the money", and the warrants are significantly cheaper than the stock price.
Now, "fully diluted shares" is the total number of shares, plus the warrants, counting warrants as if they were all exercised and became fully trading shares. I think "fully diluted shares" is a better number to use to calculate market cap than by using "outstanding shares" as most do.
Finally, I go beyond valuing a company based on Market Cap alone; instead, I value a company by dividing the Market Cap by the assets of the company, which are usually the silver reserves in the ground. Thus, I can get a sense of what you are getting for what you are paying. And then, I denominate the whole thing in terms of silver, and not dollars, to get a more constant measure.
(These first three companies, BHP, GMBXF.PK, and BVN produce a lot of silver, but are way to expensive to buy for the silver exposure for your portfolio.)
BHP Billiton Ltd (BHP)
http://www.bhpbilliton.com/
--'produces 40 mil oz. silver annually from one mine'
Additional comments: unfortunately, BHP has a 53 Billion market cap, so we can't buy BHP for the silver exposure. IE, $53 Billion / oh, say, 1000 million?????= $53/oz.
Dear BHP: By all means, keep mining the silver if you want the silver exposure, and want to be in the silver business. But don't sell the silver. Keep it. Let the profits of your entire company accrue as an increasing physical supply of physical silver. In fact, do as Buffett did, and buy more silver if you can. It would be infinitely easier for you to buy silver from yourself than it would be to buy 40 million ounces of silver from the COMEX, which, today, might be impossible.
Grupo Mexico SA de CV (GMBXF.PK)
http://www.gmexico.com/indexi.html
651,646,640 shares (2002 annual report)
@ $4.00/share
$2606 mil MC
"Grupo Mexico ranks as the world's third largest copper producer (copper at $1.24), fourth largest producer of silver and fifth largest producer of zinc."
They produced 28.2 million oz. of silver, worth $129 million, in 2002. (P. 5, annual report.)
Total value of produced metals: $2527 milllion. (but the company lost money in 2002). They mainly produce copper, 900,000 tons worth $1.5 billion in 2002. Thus, silver, at 2002 prices, is only 5% of their production value. Silver is a by-product for them, not a main product.
I don't have silver reserve figures, nor do I see any need to find them or add them, since they are not a primary silver producer, and I don't think anybody would be buying them for the "silver exposure".
If we assume 280 mil oz. of silver (ten years reserve for production), then we still don't have anything exciting for the silver alone.
$2085 mil MC / 280 = $7.45/oz. cost.
Compania de Minas Buenaventura SA (BVN)
Minas Buenaventura
NYSE:BVN
- Peru´s largest publicly traded precious metals company
--produces over 10Moz of silver per year
--looks way too expensive for the silver alone: 3.6 Billion market cap.
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HL (HECLA MINING CO)
http://hecla-mining.com/
hmc-info@hecla-mining.com (208) 769-4100
110 mil shares
@ $7.66/share
$885 million Market Cap (MC)
near zero debt, cash: $123 mil (Feb., 2004)
(est. 2003 production 9 mil oz. silver)
(the La Camorra gold mine, 412,000 oz gold.) ... (x 350/5 = 28 mil silver equivalent oz.)
San Sebastian silver mine, (proven & probably reserves) 8.7 mil (produced 3 mil)
the Greens Creek silver mine (proven & probably reserves) 31 mil (produced 3 mil) Hecla owns just under 30% of it!
the Lucky Friday mine (proven & probably reserves) 14 mil. (produced 2 mil)
Total silver = 32 million oz.
Plus 412,000 oz. gold x 10 = 4.1 mil oz silver equiv.
Total silver equiv. reserves = 36 mil oz.
(Since my method values silver in the ground as a key asset, I should also value the cash as a "silver asset" which will be "marked to market" if silver goes up, and cash goes down. If HL is smart, they should be able to turn the cash into increased "silver exposure" either through buying silver properties, silver equities, or physical silver.)
($123 million cash / $6.70/oz = 18.3 mil "silver equiv" oz.)
18 + 36 = 54 mil oz.
$885 mil MC / 54 mil "oz." = $16.39/oz.
You get "approx" .41 ounces in the ground for 1 oz. silver's worth of stock.
Additional comments: Hecla Had Record Silver Production at Record Low Costs in 2003; Generates 90% Increase in Income before Environmental Accruals; For the Period Ended December 31, 2003COEUR D'ALENE, Idaho--(BUSINESS WIRE)--Feb. 12, 2004--Hecla Mining Company (NYSE:HL) (NYSE:HL-PrB) today reported 2003 year-end income before environmental accruals of $17.1 million and a 48% increase in gross profit compared to 2002. This compares to income before environmental accruals in 2002 of $9 million, a 90% increase year-on-year. Gross profit was $35 million in 2003 compared to $23.7 million in 2002, with 62% of 2003's gross profit coming from Hecla's silver properties. Hecla's cash flow provided by operating activities increased 28% in 2003, to $26 million. In the third quarter of 2003, Hecla recorded a noncash accrual for estimated future environmental costs of $23.1 million. Primarily because of this accrual, Hecla's net loss for 2003 was $6 million compared to net income in 2002 of $8.6 million.
Wow. 90% increase in income, but still a net loss after the "future environmental costs".
Hecla would have made more money in 2003 if they took their 100 million dollars, and bought silver bullion at $5/oz., to obtain 20 million oz. of silver. At $6.50, they would have made $1.50 per ounce, or $30 million on the silver bullion investment alone.
This week was a good one for silver, and HL announces that their income is up 90%. But the stock is still down for the week. I think there are several good reasons for that.
HL has more oz. than listed in the "proven & probable" category used in this calculation. Vein mining makes reserve calculations difficult, and HL has rarely had more than about a 3-4 year picture of reserves ahead of them in 100 years of production.
I have been counting their papar cash as if it could be silver, but it still does not help boost their valuation much. They are still the most expensive company on the list in terms of cost per oz. of silver in the ground. But if HL bought 19 mil oz. of physical silver, they might break the back of the silver market, and significantly boost their own profitability.
Another way to check the value of HL is too look at profit, since they are active miners. "In 2003, Hecla produced 9.8 million ounces of silver at a record low average total cash cost of $1.43 per ounce." (Cash costs are that low, and good, because that figure includes gold credits!)
Here's another way to get a "guesstimate" of HL's reserves. I will assume they have enough silver to last another 20 years of mining. That's a fair enough time for a mine plan I suppose. I suppose they could run out of silver sooner, or later. They produce 10 mil oz. in a year. 10 mil oz. x 20 years = 200 mil oz.
$823 mil MC / 200 mil oz. = $4.11/oz. that you'd pay for the silver in the ground when buying HL. HL is still expensive, no matter how I run the numbers.
And in 4 months, nobody has been able to rationally justify this high valuation to me, nobody from the company, and not a single email from any investor. I believe that this stock trades on market perception, reputation, and momentum. As for me, I'm not buying such intangibles. I'm buying silver in the ground, real assets, or exploration potential.
In the Feb Press release, Baker said, "The fact that after a hundred-plus years of operation we are producing more silver at lower costs than at any time in our history points to the quality of the mining districts in which we're located. We expect these districts to continue to allow us to generate growing production at the lowest costs in the industry, while generating excellent returns on investment."
Low mining costs do not necessarily generate excellent returns on investment if you are considering buying HL stock, if the stock is at a high price. You need to consider the price of the stock in order to determine whether there will be excellent returns for your stock purchase! The way to do that, is to look at the P/E ratio. Although Hecla had a gross profit of $35 million in 2003, they had a net loss! But let's forget the environmental cost for a moment. Even a profit of $35 million is not that great if the market cap of the stock is about twenty times that (oh about $700 million), because if you assume the rosy picture of the year 2003 will stay the same, you'd have to wait 20 years to recoup your investment and just break even!!!
Baker may be referring to Hecla generating good returns on the investment that Hecla has made into their own company. Perhaps they spent a few million and are now have expectations to earn more millions. But Baker also completely ignores the investment opportunity cost, and loss, that Hecla has suffered from holding $123 million in fraudulent paper money, cash, instead of holding silver, like Hecla should have been doing by now.
Earth to Hecla: Is silver useful as money, or not? It's a simple question, and your actions speak volumes.
HL was downgraded Jan 6th by CIBC Wrld Mkts from Sector Perform to Sector Underperform http://biz.yahoo.com/c/20040106/d.html?hl
ABX (Barrick)
http://www.barrick.com/
535 million shares
@ $20.45/share
$10.94 billion Market Cap
5.5 million oz. / year gold production.
--production hedged out for 3 years, or about 18 million oz. (most notorious hedger of the industry, the "leader")
--price of hedges locked in near the market lows, perhaps $340/oz. on average, nobody knows for sure, because Barrick will not say
--reportedly, Barrick is trying to "unhedge".
--reportedly, they plan to deliver 1/3 of production to hedges, which means they will be hedge free in about 10 years.
--the size of the hedge, 18 mil oz. gold, at $400/oz., would be valued at $7.2 billion dollars. At $500/oz, it's $9 billion.
--but they claim to be "debt free", if you ignore the gold they owe for delivery, at locked in, low prices. (only true if gold is not money)
--cash "rich" of about $1 billion dollars.
Silver Reserves reported to be 850 million ounces!
Gold Reserves reported to be 86 million oz. (x 10 = 860 mil oz. + 850 silver = 1710 mil oz. "silver equiv."
$10,940 million Market Cap / 1710 mil oz. = $6.40/oz. silver
You get "approx" .95 ounces in the ground for 1 oz. silver's worth of stock.
Additional comments: Over the years, Barrick has hedged their production, which many claim has helped to depress the price of gold and silver, by artificially adding to supply. (Barrick's promises becoming the extra supply.) The declining price of the precious metals has put other miners out of business, which Barrick has acquired at low prices. If Barrick goes bankrupt due to their hedges, and rising gold and silver prices, then perhaps Barrick's many properties will, once again, be sold at distressed prices.
Barrick boasts a "cash cost" of $189/oz., for gold for 2003, in the last year, yet their cash has dropped from $2 billion down to $1 billion.
CDE (COEUR D'ALENE)
http://www.coeur.com
coeurir@coeur.com (208) 769-8155 or (800) 624-2824
210 mil shares (Issued 32 mil new shares late Oct. 2003)
@ $7.08/share
$1509 mil MC
cash $38 mil (I think this is an outdated cash figure)
San Bartolome (Bolivia) reserves 146 mil silver
Silver Valley Silver reserves 32 mil silver
Rochester reserves 43 mil silver
Cerro Bayo reserves 3.7 mil silver
Total: 224.7 mil silver
(to Produce 14.6 mil oz. silver in 2003)
$1509 mil MC / 224.7 mil oz = $6.72/oz.
You get "approx" 1 ounces in the ground for 1 oz. silver's worth of stock.
Additional comments: A few weeks ago, CDE announded their intention to try and raise $150 million in the capital markets by issuing shares. http://biz.yahoo.com/prnews/031211/sfth014_1.html
The first week of January, CDE announced a deal for $160 million in convertable bonds! Beware of debt!
CDE continued to lose money in third quarter 2003, a loss of 10 cents/share, and they realized low prices for silver sales, $4.77. I believe they have hedged their gold production at low prices.
CDE looks like they owe both gold and dollars. A double debt warning for CDE investors!
Again, their listing of ounces is in the "reserves" category (more certain) not the "resources" category, which is less certain. They may have "resources" but like HL and Industrias Penoles, they give no estimates.
IPOAF.PK (INDUSTL PENOLES)
http://www.penoles.com.mx
397.5 mil shares outstanding (2002 annual, unchanged since 2001)
@ $4.50/share
$1,788 mil MC
419 proven and probable reserves of silver (from 2002 annual report on website)
$1,788 mil MC / 419 oz. silver = $4.27/oz.
You get "approx" 1.57 ounces in the ground for 1 oz. silver's worth of stock.
Additional comments: Industrias Penoles is the world's top producer of refined silver. They actually derrive more revenue from silver than any other source. But they lost money in 2002.
78.5 million oz. silver refined by the metals division in 2002, and 1 mil oz. gold.
They probably refine almost all the silver that comes out of Mexico.
They probably produce about 34 mil oz. of silver from their mines annually, and they have expansion plans.
I think Industrias Penoles should stop mining silver if they are doing it at a loss. Basic econ 101, right? Don't engage in uneconomical activity. Perhaps they have a small gain this year with improved prices? Regardless, they should realize that silver in the ground is an asset, and also that silver in the hand is an asset. If they do make a profit, I hope they decide to keep the form of their profits in silver, or at least, pay out a dividend in silver.
I've heard this stock is tightly held, most is family owned.
Their oz. numbers are "proven & probable reserves", which is much more certain than most of the others which are mostly "inferred and indicated resources." They undoubtedly have "inferred and indicated resources" in addition to the "proven & probable reserves," I just could not find any info on that at the website or in the annual report.
* CFTN.PK (CLIFTON MINING) (I own shares)
http://www.cliftonmining.com/
clifton@cliftonmining.com 801-756-1414 (303) 642-0659 Ken Friedman
45 mil shares fully diluted (Oct. 2003)
@ $2.125/share US
$96 mil MC
http://www.cliftonmining.com/wsreview.htm --source of 100 mil oz. resources est.
http://www.cliftonmining.com/resource.htm
From: http://www.siliconinvestor.com/stocktalk/subject.gsp?subjectid=13531
"A previous geologist has talked about a possible resource of 1 billion oz. of silver, and 5 million oz. of gold."
100 mil oz. silver
+500,000 oz. gold x 10 = 5 mil oz. silver equiv.
= 105 mil oz. silver.
up to 1000 mil oz. silver "exploration potential".
Clifton has a complex JV agreement with Dumont Nickel. In sum, here is what Keith Moeller VP, Clifton Mining Company wrote to me: "If Dumont produces a positive feasibility study on an individual property piece, then they gain a 50% interest in that piece alone, not in the rest of the property. If they spend more than 5 million dollars (US) on any one piece and they produce a positive feasibility study on that piece, then they will gain a 60% interest in that one piece of property, not in the rest. If they stop at any time or fail to produce a positive feasibility, then they will gain no interest in any of our property. Right now we have around 7 different pieces of the property that have "Stand Alone" mine potential. If Dumont stakes or purchases any property within five miles of the joint venture property, then we automatically receive a 50% interest in that property."
My problem is how to quantify that. First, there is the range of potential silver resources. Second, there is the range of potential ownership, which is highly variable, and not subject to the entire property, nor necessarily subject to spending by Dumont, but subject mostly to Dumont doing a positive feasibility study on each of many properties . At the extreme ranges, the values are:
40% to 100% of 105 = 42 - 105 million oz.
40% to 100% of 1000 = 400 - 1000 mil oz. "exploration potential"
$96 mil MC / 42 mil oz. = $2.27/oz.
$96 mil MC / 1000 mil oz. = $.10/oz.
You get "approx" 2.95 ounces in the ground for 1 oz. silver.
Exploration Potential: 67
Additional comments: Note the "exploration potential" is very large.
For more info on what's going on with Clifton, see http://www.dumontnickel.com , JV partner.
Clifton has 25% ownership of a biotech firm that makes a colloidal silver.
The biotech firm has a patent on a "super" colloidal silver solution made with 10,000 volts that adds oxygen that gives it more powerful antibacterial properties, and is safer since it uses less silver, which would prevent "blue skin" argyria. Normal colloidal silver that you can make at home with 30 volts works to kill bacteria by disrupting the oxygen metabolism of the cell wall, killing bacteria with oxygen. The market for safe antibiotics is in the multi Billions of dollars.
Clifton Mining Company - New Human Study Data Released
"American Biotech Labs (ABL) has been working in conjunction with four hospitals in West Africa that have been conducting human studies of the ASAP product as a antibiotic alternative against human ailments like malaria, fungal infections, ear infections, measles, septic ulcers and a number of serious viral problems. This is the second set of human studies released by the west African hospitals. The new studies found the product effective against all the above ailments."
I own shares of CFTN.PK.
SIL (APEX SILVER)
http://www.apexsilver.com/
information@apexsilver.com (303) 839-5060
45,023,760 ordinary shares outstanding. (Jan 30th press release)
@ $21.83/share
$983 mil MC
cash on hand: $205.6 million after Jan 30th share offering.
San Cristobal (Bolivia) (proven & probably reserves) 454 mil silver
(forecast capital costs for construction to total approximately $435 million)
(Produced zero silver in 2002)
7.8 billion pounds of zinc, and 2.9 billion pounds of lead
$983 mil MC / 454 mil oz = $2.16/oz.
You get "approx" 3.09 ounces in the ground for 1 oz. silver's worth of stock.
Additional comments: Apex is now the most cash rich silver stock on the list. Over $200 million! Amazing. Their plan, as they have stated all along, is to wait until higher silver and zinc prices to develop their deposit. I wonder if they will be smart, and hold their "cash" in the form of silver bullion while they wait for silver bullion to go up in price? Seems so basic even a child could understand it. The amazing thing is that there are position limits on paper longs, and thus, APEX could not buy that much silver bullion even if they wanted to. Ironic, isn't it? It is the most natural and sensical thing for Apex to buy silver while they wait, and doing so would push up the price, but they likely will not act, and almost cannot act due to the problem of scales of size. This, to me, is so bizzare, I cannnot fathom it. I think I understand a lot, but this.... it is simply mind boggling. It's the result of a system so out of balance, it's insane, and the rational mind has no answer for the bizzare things we see today.
Look, COMEX is the last place on earth to buy silver now, in any really big size. Reports are coming in from all over that there is no bullion available anywhere.
$345,000,000: 52.8 mil oz. of registered COMEX silver @ $6.55 /oz. http://tinyurl.com/vrcw
My advice to Apex would be to buy every bit of silver they can get. Even hold out a sign, put up a website, hire people to take the orders, and start buying silver, in all forms, at 10% and even 15% above the spot price. Just make yourself become the "market maker" and start buying silver from all over like a sponge soaking up water. Let the silver find you! In the long run, a 10-15% commission is nothing when the trade is this good. There may be position limits at the COMEX, but it's not illegal to offer to pay what you are willing to pay to the free market. Forget the COMEX, and make your own market!
Apex silver primarily has institutional investors.
Apex has a lot of zinc. That's an added bonus that is not factored in to my method of valuation. Zinc prices have been heading up soon, so that's another bonus. Plenty of zinc is especially good if zinc is moving up in price. Zinc is now up to $.51/lb., from a low of about $.35/lb. For zinc prices, see http://www.metalprices.com
And, they are not mining now, but are waiting for higher silver prices. That's also a plus. The management also seems to understand that silver will move upwards a lot. Another plus. Finally, George Soros, Billionaire, owns a bit of this one, just under 10% I read recently. That's another plus, in general, for the silver market if Billionaires are paying attention to it. There are several other zinc / silver plays on this list that investors might also consider: CZN.TO, EXR.V, MMGG.OB (I own all three of these, but not SIL.)
MFN MFL.TO (MINEFINDERS)
http://www.minefinders.com/
Shares Fully Diluted 34.1 mil
@ $9.16/share
$312 mil MC
Cash on hand, Fully Diluted: C$34 million
"over 3.5 mil ounces of gold resource and 160 mil ounces of silver" --Dec. '03
silver conversion = 3.5 x 10 = 35 mil + 160 mil oz. silver = 195 mil oz. silver
At 70:1 ratio, 3.5 x 70 = 245 "silver equiv" of gold, and 160 mil of silver = 405.
245/405 = 61% of the mineral value is in the gold, 39% silver.
At 10:1 ratio, 35/195 = 18% of the mineral value is in the gold, 82% silver.
"In addition to the resources already drilled, Minefinders controls a strong portfolio of properties in Nevada, Arizona, and Mexico which have the potential to host new multi-million ounce discoveries over the next few years."
$312 mil MC / 195 mil oz. = $1.60/oz.
You get "approx" 4.18 ounces in the ground for 1 oz. silver.
Additional Comments: At 70:1 silver to gold ratio, over half of MFN is in gold, so consider this a significant gold bonus. MFN also now lists their resource figures on their website's main page. I'm sure investors appreciate this. I do.
PAAS (PAN AMERICAN SILVER)
http://panamericansilver.com/
info@panamericansilver.com (604) 684 -1175
58.2 mil shares fully diluted. (Sept. 2003)
+ 3.33 mil share financing (Feb 27)
61.5 mil shares fully diluted (Feb 27, 2004)
http://panamericansilver.com/s/CorporateInformation.asp?ReportID=26039
@ $17.67/share
$1086 mil MC
10 silver properties (3 in production)
produced 7 mil oz. silver in 2001:
Reserves & Resources through Dec. 11th, 2003 from
http://panamericansilver.com/s/ReservesAndResources.asp?ReportID=25303
743.2 million total
$1086 mil MC mil MC / 743.2 mil oz. = $1.46/oz.
You get "approx" 4.58 ounces in the ground for 1 oz. silver's worth of stock.
Additional Comments: Pan American Silver Announces US$55 Million Common Share Financing
Pan American of Canada buys Morococha silver mine in Peru for US$35 million
This $35 million acquisition is a great deal for PAAS, and a minor help for PAAS shareholders. According to the press release above, the silver mine produced 3.5 million ounces of silver a year, at a cash cost of $3/oz., which is great! At $6.50/oz, that's $3.5 x 3.5 mil oz. = $12.25 million per year profit after cash costs! That gives the acquisition a P/E ratio for the mine's acquisiton cost of under 3! What a deal!
Unfortunately, PAAS shareholders are paying way above that when they buy the stock today. After this acquisition, PAAS should have a "2004 silver production forecast to 13 million ounces from 10.1 million ounces and will reduce forecast cash costs to below $ 3.50/oz, bringing anticipated total costs to less than $4/oz for the year." Now, at $6.50/oz, that's $2.5 x 13 mil oz. = $32.5 million per year profit, after cash costs. That gives a P/E ratio for PAAS of about $1000 / $32 = 31. Therefore, considering the two P/E ratios, 31 compared to under 3, PAAS stock is over ten times overvalued compared to other silver mining opportunities that exist in the market, such as the property they just purchased.
I believe PAAS is one of two silver companies on the list today that is significantly in debt (the other is now CDE).
PAAS recently went into debt in order to ramp up production. I am strongly biased against debt and against producing and selling a valuable asset like silver at today's low prices. But it's a convertible debenture, so the debt can be converted into stock. They know and believe higher silver prices are coming, which is great, and their strategy is to be in solid production mode when the higher price hits.
I think it is extremely important to invest in a company that understands the silver story as reported by Ted Butler, David Morgan, and especially me, because I emphasise the potential of monetary demand. If the company does not understand this, then they are more prone to doing extremely stupid things like perhaps hedging silver at $10/oz. or so, as they will see that as an "unusual spike," instead of the inevitible stopping point on a major rise. What if your silver company decides to lock in silver prices at $8, and hedge years of production to "protect the shareholders and provide exposure to the high $8/oz. price," only to watch silver prices head past $25 and past $50/oz? Your stock could get wiped out in bankruptcy, and your investment could go to zero value! This is the danger of stocks! Your investment is subject to the whims of management!
WARNING: PAAS says at their website that they will hedge silver, in order to finance mine construction.
http://panamericansilver.com/s/CorporateProfile.asp
"Pan American is loath to give away the upside on any of its silver production, especially at current low metal prices, and will do so only to the minimum extent required as a condition of prudent mine financing."
My opinion is that it is NEVER prudent to go into debt, or lock in silver prices to finance a mine. If PAAS cannot raise capital on the markets by issuing shares, then they should not be financing new mine construction. If the market will not support new mine construction, then the market does not need more silver. PAAS and CDE should learn to trust the free market process, and avoid debt.
On July 30th, 2003, PAAS got $75 million in cash from a debenture debt financing deal.
http://tinyurl.com/yrv8
On July 30th, 2003, silver was $5.10/oz.
http://www.kitco.com/charts/historicalsilver.html
On Jan 9th, silver was $6.46/oz., a $1.36/oz. increase over $5.10, or an increase of 27%
PAAS's "working capital" (or non-working, depreciating, paper dollars) was $92.8 million on Sept. 30, 2003 or 18.19 mil oz. silver equiv. Check the link.
http://www.panamericansilver.com/i/pdf/2003_Q3.pdf
If PAAS averaged holding $92.8 million dollars from July to Jan 9th, then they lost the equivalent of 27% on their "money".
On Jan 9th, $92.8 million at $6.46 can only buy 14.36 million oz. of silver. So, PAAS lost (18.19 - 14.36 = 3.83 mil oz.) which, at $6.46/oz., is $24.74 million dollar loss worth of silver by holding dollars instead of silver bullion during that time period. Capital spending was only $3.5 million during the third quarter, so they did not need to use the money right away--they should have kept it in the form of silver bullion, obviously.
* CZN.TO CZICF.PK (CDN ZINC) (I own shares)
http://www.canadianzinc.com/
czn@canadianzinc.com 1-866-688-2001
67.3 mil shares fully diluted as of Dec., 2003 (as stated in the proxy, p.8)
80.2 fully diluted shares as of Feb 2, 2003
@ $1.66/share Cdn x .75 US/Cdn = $1.24 US
$100 mil MC
$13.5 million cash, Cdn, no debt.
not mining ($20 mil needed to finish & start the mine) ($100 mil worth of mining infrastructure in place!)
~70 mil oz. (IN ZONE 3 only!! of 12 zones! This company seems to be greatly under-reporting their silver reserves. Their 18 year mine plan consists of zone 3 only, but there are 12 mineralized zones on the property.) Really, perhaps well over 100 mil oz. silver.
$100 mil MC / 70 mil oz. = $1.43/oz.
You get "approx" 4.70 ounces in the ground for 1 oz. silver's worth of stock.
Additional comments: CZN recently bought back a royalty agreement that had a face value of $8.2 million, for 300,000 shares and 250,000 options at $1.25 Cdn.
The additional cash from the recent private placements means that CZN will now be able to drill and explore more of their property. Although the company is now more costly to buy, it is far less risky, given that they now have $13 million in cash.
CZN likely has much more silver in the ground, and has good profit potential.
I would like the company to privide an estimate of the silver on the rest of their properties, but their mine plan consisted only of zone 3 at the moment. The rest must remain "exploration potential" for now.
To get the mine up and running, they might be able to pay back such debt within 2 years, but I would hope they would avoid debt, and raise the capital as the share price begins to approach US $2/share or more, and do a final public offering between US $2-4/share.
I note several very, very positive things about this company.
1. This was the mining operation set up by the Hunt brothers, the major silver investors in the silver spike to $50/oz. in 1980 who were bankrupted by their own debts and margin calls as a result of the COMEX rule changes and silver short sale manipulation. The Hunts spent $50 million building infrastructure to build the mine. They were 90% complete when bankruptcy hit. The value of those buildings is now $100 million, and the mine only needs about $20 million (CAN) ($15 mil US) to get the mine up and running. That's much cheaper than other cost estimates of other operations.
2. The 70 million oz. of silver estimate is for zone 3 only. But there are 12 zones on the property. The zone 3 estimate is for a 10 year mine plan that involves mining zone 3 at current metals prices.
3. High Grade ores:
12% zinc/ton; = 240 lbs. zinc/ton x 50 cents/lb. = $120/ton for the zinc.
10.1% lead/ton = 202 lbs. lead/ton x 40 cents/lb. = $80/ton for the lead.
6 oz. silver/ton x $6.50/oz. = $39/ton for the silver.
0.4% copper/ton = 8 lbs. copper/ton x 1.30 cents/lb. = $10/ton for the copper.
Total: $249/ton! (Prices have been moving up!) Prices accurate as of Mid Feb., 2004
4. My method of valuation: If I counted the zinc as silver, then the price of this company would be something like four times cheaper than it is based on my "valuation method". If I counted the lead as silver, then this company would be about 4-5 times cheaper.
5. Zinc and base metals prices are moving up strong. 50 cents/lb. for zinc! Check http://www.metalprices.com/ for updates.
I own shares of CZN.TO
GRS GAM.TO (GAMMON LAKE)
http://www.gammonlake.com/
gammonl@sprint.ca (902) 468-0614
Fully Diluted 58.7 mil shares (Nov 30, 2003)
+3.33 mil special warrant financing (Feb 27th, 2004)
Fully Diluted: 62 mil shares (Feb 27th, 2004)
@ $5.09/share
$315 mil MC
Total Ocampo Inferred: 1,124,000 oz. gold, 50,438,000 oz. silver
Silver equiv = 11.24 mil oz. + 50.44 mil oz. = 62 mil oz.
Total Ocampo Measured & Indicated 2,207,800 oz. gold, 108,438,000 oz. silver
Silver equiv = 22 mil oz. + 108 mil oz. = 130 mil oz.
Total Ocampo Measured & Indicated plus Inferred = 182 mil oz.
Gammon owns 26.3% of Mexgold, MGR
Since Mexgold owns 185 mil oz. of "target exploration potential", 26.3% of that is 48.6 mil oz.
182 + 49 = 231 mil oz.
$315 mil MC / 231 mil oz.= $1.36/oz.
You get "approx" 4.90 ounces in the ground for 1 oz. silver's worth of stock.
**Note** most of Mexgold's oz. that are added in are an "exploration target" not yet "inferred resources".
Additional comments: Drill results released Jan 7th: http://biz.yahoo.com/cnw/040107/gammon_lk_drill_rslts_1.html
At current prices of a 64:1 silver:gold ratio at $425/oz gold and $6.60/oz silver, the resources are worth $1048 million of silver, and $1411 million worth of gold. Cash cost is $85/oz. Life of mine is 7 years.
ECU.V ECUXF.PK (ECU SILVER MINI)
http://www.ecu.qc.ca/indexen.html
ecu@ecu.qc.ca (819) 797-1210
fully diluted shares = 103.3 million (6 January 2003)
@ $.41/share Cdn x .75 US/Cdn = $.31
$32 mil MC
http://www.ecu.qc.ca/reservesen.html <
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