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-- Posted 13 March, 2004 | Digg This Article
FRIDAY, March 12th, 2004
This week's report lists 98 silver stocks. There are 30 silver stocks that list reserves, resources (and exploration potential.) which I calculate by using my "ounce in the ground" forumula. There are 46 explorers. There are about 22 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. If this sounds wrong, it's not. It's common sense, and it's how the market works. People bring what they have to sell to the market place and advertise it. That's capitalism and the free market at work. If you tell me about a silver stock not on this list, I expect that you would have invested in it first. I wouldn't want to put your recommendation on this list, and drive up the price of your hot undervalued silver stock before you buy your great tip! So, buy it first, and then tell the world what you did and how smart of an investor you are and how much homework you did to find your favorite unknown silver junior.
So, because I have a market reach, I also receive a lot of tips about silver stocks. And thus, I may have invested in some of the best ones that came my way. If you believe I may have an edge based on my work and position... then the best way for me to share this with you is to is tell you where I put my money. It's not investment advice. 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: Click here
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. To read more about my religious bias when it comes to investing, see my new essay, Biblical Guidelines for Managing your Money
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.
Kitco reports silver at $7.03 as of Friday, 1:57 PM West Coast US, which was used to calculate the following figures. The CAN $ / US $ conversion factor is .7496. 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) .45 down --current producer (gold bonus) cash rich.
- ABX (BARRICK) 1.1 down --infamous hedger (18 mil oz. gold hedged, 3 yrs production)
- CDE (COEUR D'ALENE) 1.1 down --current producer, (gold bonus) in debt.
- IPOAF.PK (INDUSTL PENOLES) 1.7 down --current producer, mostly family owned.
- SIL (APEX SILVER) 3.3 down --large zinc bonus, low grades, cash rich--$200 million!
- CFTN.PK (CLIFTON MINING) 3.4 down -- (78 EXPT) (colloidal silver patent bonus)
- ECU.V ECUXF.PK (ECU SILVER MINI) 3.6 up --(9.7 EXPT) --50% gold bonus
- MFN MFL.TO (MINEFINDERS) 4.2 down --significant gold bonus, $35 mil cash on hand.
- KBR.V KBRRF.PK (KIMBER RSCS) 4.6 up A one property company, with exploration potential.
- PAAS (PAN AMERICAN SILVER) 5 down --current producer, in debt.
- GRS GAM.TO (GAMMON LAKE) 5 down --current producer, owns 26% of Mexgold
- WTZ WTC.TO (WESTERN SILVER) 5.6 down -- (24 EXPT) large mine development cost.
- * CZN.TO CZICF.PK (CDN ZINC) 5.8 down --large zinc bonus, high grades, low start up costs, great EXPT
- FSR.TO FSLVF.PK (FIRST SILVER) 5.9 down --current producer, (not profitable '03 3rd q.) unhedged
- SSRI (SILVER STD RSC) 6.6 down --multi-property company, understands silver story
- * TM.V TUMIF.OB (TUMI RSCS) 6.8 up -- (14 EXPT) recent bonanza grade silver discovery
- ORM.V OREXF.PK (OREMEX RES) 8.5 up (35 EXPT)
- MGR.V MGRSF.PK (MEXGOLD RSCS) 8.5## up (##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) 14 down --(24 EXPT) low grades, silver 1/3; also gold & zinc bonus.
- * EXR.V EXPTF.PK (EXPATRIATE RECS) 15 even --significant zinc bonus 60% zinc, 25% silver
- RDV.TO RDFVF.PK (REDCORP VENTURE) 15 way up --60% gold bonus
- * ADB.V ADBRF.PK (ADMIRAL BAY RSCS) 17 up --actively expanding resources. (Huge gas bonus)
- * SVL.V STVZF.PK (SILVRCRST MINES) 18 up --(32++ EXPT) --(Silver in Honduras) ++ acquired silver props.
- HDA.V (HUSIF?) (HULDRA SILVER) 18 up --very tiny, no debt, zinc bonus, low start up costs.
- * ASM.V ASGMF.PK (AVINO SILV GOLD) 21 even --owns 49% of the Avino+ 4 other silver props. (silver bonus)
- GGC.V GGCRF.PK (GENCO RESOURCES) 22 up
- CHD.V CHDSF.PK (CHARIOT RSCS) 23 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) 61 even --lease expiring on largest property, June 1 2004.
* = I own shares
Explorers (by market cap):
- EZM.V EZMCF.PK (EUROZINC MINING)
- MCAJF.PK (MACMIN LTD)
- CDU.V CUEAF.PK (CARDERO RSCS) 40-68 "exploration potential"
- AOT.V ASOLF.PK (ASCOT RSCS) -- owns percentage of Cardero, CDU.V
- * 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)
- IAU.V ITDXF.PK (INTREPID MINRLS) 7 "exploration potential"
- MAG.V MSLRF.PK (MAG SILVER)
- CAUCF.PK (CALEDON RES)
- MAI.V MNEAF.OB (MINERA ANDES) (gold bonus)
- * NPG.V NVPGF.PK (NEVADA PAC GOLD) 31-150 "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)
- * OTMN.PK (O.T. MINING) very large exploration potential
- SPM.V SMNPF.PK (SCORPION MINING)
- MMM.TO MMAXF.PK (MINCO MINING)
- BZA.V ABZGF.PK (AMER BONANZA)
- EDR.V EDRGF.PK (ENDEAVOUR GOLD) A PRODUCER (I could not yet find a listing of resources or reserves)
- * FR.V FMJRF.PK (FIRST MAJESTIC) -- Bought a former silver producer. Acquiring silver properties.
- DNI.V DMNKF.PK (DUMONT NICKEL) exploring Clifton's property
- SML.V SMLZF.PK (STEALTH MNRLS)
- * NBG.V NBULF.PK (NEW BULLET GP) 30 - 84 "exploration potential"
- SDR.V SDURF.PK (STROUD RSCS)
- * 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)
- 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)
- EGD.V EGDMF.PK (ENERGOLD MINING)
- LEG.V LEGCF.PK (LATEEGRA RSCS)
- SHSH.PK (SHOSHONE SILVER)
- BGS.V BLDGF.PK (BALLAD GLD SLVR)
- AUN.V AUNFF.PK (Aurcana Corp)
- SRY.V (STINGRAY RSCS)
- 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):
I've been producing this report for 6 months now. Week 26! Wow! I have been working very hard during this time, and it has been very profitable investing in silver stocks. During the last 8 months, the silver price has taken off like a rocket, which is extremely significant. Imagine investing at the recent bottom, at $4.50 in June, 2003, and now sitting with silver at $7.03 (after a high of $7.25 mid week). From $4.50 to $7 is a 55% gain. You can't get that in bonds anywhere! Who says the metal pays no interest or return??? Utterly ridiculous!
Yet silver is still cheap. Many other commodies have run higher and faster. Silver is still lagging, and will certainly race ahead at some point, I suspect it will outperform all other commodities. Silver will one day have massive monetary demand, unlike any other commodity except for gold.
Silver continues to march upwards in price week over week. Some of the junior silver stocks have really lagged, and are getting quite cheap. To me, this report is now more valuable than ever, as producing it is helping me to find, and present, so many undervalued junior exploration silver stocks. After all, I do trade on my own advice and valuation methods, and on the best of your silver stock recommendations to me.
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This week, Ted Butler (see http://www.investmentrarities.com/03-08-04.html ) wrote an excellent commentary, "Bigger Isn't Always Better", that explains that there are 578 billionaires on the Forbes list. These are people who could each, individually, buy all the silver that is known to exist in the world. So, when people ask me, "When will silver really explode up?" the answer is that silver could explode at any time when just one of those wealthy people decides to buy, or when enough little guys decide to buy.
The smaller investor has an advantage over larger investors, because a smaller investor can actually put a meaningful percentage of their wealth into silver. A billionaire can't.
I want to speak of the different concerns of different sized investors for a moment. A very, very large investor has very different perspectives than a smaller investor. There is probably a major perspective change for every change in size of an order of magnitude. That means that an investor who is ten times wealthier than another, probably has very different concerns, as follows. Most people that have brokerage accounts have less than $10,000 to invest. Their concerns will be vastly different from someone who has $100,000 to invest. A person with $10,000 has barely more money to invest than they have to make ends meet, and is likely too busy to really study much about investing, because they are working at a job. A person with $100,000 may have a substantial income, and may still be too busy to study about investing, or it may be an inheritance and they don't know anything at all about investing. A person with at least $1,000,000 to invest is in an elite group of people, one in 30-100 investors, and qualifies to participate in private placements, but is novice at the private placement process, and may not even know they qualify for that. These people are those who fund capital development. A person with $10 million may be experienced at private placements. A person with $100 million to invest is likely not in the silver market with both feet, because it is too small, and their fortune too big. They would likely not want to trust their money to the silver exploration sector, since they would have to put $5 million into each of 20 exploration companies, and many exploration companies barely have market caps that big! Next, we have the billionaires, none of whom could even buy silver, because the bullion market is too small. And finally, we have the multi billion corporations.
To a company like J.P. Morgan, that has trillions of dollars worth of derivatives on the books, and a market cap around $86 billion (@ $42/share), they would not likely consider that being short excessive amounts of silver is any danger. They may be short 100 million ounces, and not be worried. They may have 30 million ounces of silver from the producers pledged to be delivered to them through the futures contracts. They may think they "know" that just like in banking, where less than 1% of depositors ever ask for paper cash at one time, that typically less than 1% of futures contracts ever result in requests for physical silver. So, they may think they are safe. And at the worst case scenario, they may feel that if they had a 100 million oz. silver short position that was put on at $5/oz. goes to $10/oz., then to them it would be like a loss of $500 million dollars. Again, to the big guys, this is peanuts. J.P. Morgan lost many billions loaning money to Enron, billions K-mart, and billlions to South America, without much of a problem. In fact, their stock price has gone up, nearly doubling, and adding $40 billion in market cap since those huge losses!
The concern of firms as big as J.P. Morgan or Goldman Sachs is the continuance of the entire financial system, which benefits them greatly. They want to keep the fraud of paper money creation going as long as possible. That's where they make their money. This is achieved by keeping the price of silver and gold low, or even volatile. Either way suits their needs, since a volatile price for the precious metals keeps people confused and away from the sector, and in paper money.
Once again, this illustrates the importance of buying physical silver. It would not hurt J.P. Morgan to have to do a cash payment to settle silver contracts. They can keep their own silver (if they have any), and print up the money by issuing new shares to pay off their failures in the futures markets. The only thing that will end "the major frauds of the U.S. monetary system" is when people wake up, and demand physical bullion, as they are now just beginning to do.
But the bullion banks are not safe if they are short precious metal, as they may think. They can go bankrupt like anyone else who cannot meet their obligations. In theory, there is no limit to the upside, as prices for precious metals can reach to infinity dollars per ounce in a monetary crash. At present, those big firms are the ones who make the rules, and they change the rules to suit them, such as creating position limits, and ignoring the crys of all of us little people who cry for the end of the market manipulation. However, in the end, it will be those people who have physical metal who will make the rules, and power will shift.
In the past, prices for the precious metals rose after the delivery defaults. In 1933, the banks stopped redeeming dollars for gold at $20/oz. and then the price rose. In 1971, they stopped redeeming dollars for gold at $35/oz. to overseas investors, and then the price rose. If this pattern is any indication, the delivery defaults will occur BEFORE the major price rise. They will likely try every trick in the book to keep the fraud of the dollar alive, until they absolutely run out of precious metal to deliver, or if they feel they can no longer contain or restrain major precious metal demand. We could reach the moment of truth at any time.
Now, the point I'm making about delivery defaults is this... smaller investors may think they can wait until after the delivery default. But if you do that, you will not be able to buy silver in size, if at all, and I would not wait. The reason is that if you wait until after the default, silver could leap up by $5/oz. per day for several days in a row. If it took you 5 days to locate a silver bullion dealer who would take your order under those kinds of conditions, you may miss a substantial portion of the once-in-a-lifetime big move. In fact, I strongly suspect that many local coin dealers will not be selling any silver if the COMEX defaults. In fact, it is already far too late to buy silver in size for the very big investors out there. As far as they are concerned, delivery defaults have already occurred in silver. To them, such defaults are called "position limits".
The potential exists for the shorts to drive the price of silver back to $5/oz. at any time, temporarily. Any investor in silver who is on margin, could be wiped out. But if you own silver free and clear and are debt free, you cannot be hurt, since no matter what happens in the short term with price swings, you still will own all the silver you buy, without losing a single ounce, and the value of silver will never reach zero.
Now, getting back to the benefits of being a smaller trader. As Ted Butler notes well, the smaller traders can buy silver bullion in meaningful amounts for their own portfolio, but the Billionaires cannot. This also applies to silver stocks, but in a different sort of way.
The smallest traders have the greatest advantage over everyone else, because they can buy or sell an illiquid silver stock without creating a major price swing with their buy and sell orders. Therefore, a smaller trader can more easily trade in and out of an illiquid and volatile silver stock. A larger trader like myself, who participates in private placements, does not have the ability to quickly buy or sell. The smallest traders should not "buy and hold", but rather, they should take profits when stocks run up, and swoop in when stocks run down.
If I buy a stock with $50,000, I will often move the price of a silver exploration company up 10-15% if I buy on the open market. And I'd move the price down by that much if I tried to sell. A smaller trader would not move the price much with their buy and sell order. A smaller trader may complain about the high price of $25 commission fees, but the larger trader has a 10-15% commission (or more) when buying and selling, because the buy order and sell order moves the price that much. My problem is that if my "commissions" are so high, I have to really make sure that what I'm buying is really, truly a bargain and "on sale". It does not do me much good to try and trade in and out on 20% price swings, but a smaller trader can really take advantage of such price movements.
Now, when I suggest trading in and out, I mean... trade into other silver stocks, so you keep your exposure to the silver market at all times during this bull market.
The disadvantage of the smaller trader is lack of experience, and lack of time to devote to studying the market to see where the best opportunities are.
My advice for smaller traders just starting out is to make sure you have enough cash on hand for normal life emergencies first, from $1000 to $2000. Then, get silver bullion second--at least as much as your emergency cash fund, or even twice as much, say, about $2000-$5000 worth, at least. Then, put money into silver stocks third. Although stocks themselves are risky enough, there is the additional risk that your broker could go bankrupt. There is nothing as safe as silver bullion, in my opinion, especially if the day may come when you will need something to trade for food during a severe economic depression.
Understanding the different concerns of different sized traders really helps you to understand how and why the silver market is manipulated, and why silver is priced so cheaply. The biggest traders simply do not care about silver at all. Not yet. It is off their radar screen, and it is not even like a fly that may bother a horse.
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Here's how to buy silver: Go grab your local phone book. Look up "coin dealers". Ask the dealer if they have any "silver bullion", and how much. (Don't buy numismatics, which are collector coins that cost far higher than the bullion or metal content of the coins.) If they don't have silver bullion, they can order it for you. Then, go down to your dealer, and either buy the bullion same day, or give him a money order or cash, and wait for your order to arrive. It's that easy. There are primarily three kinds of silver bullion available from local coin dealers:
1. 90% silver coins mined by the US until 1964: quarters, half dollars, and dimes. They sell close to the spot price, and contain .715 of one oz. per $1 face value, whether 4 quarters, 2 half dollars, or 10 dimes. To find out how much it will cost over the spot price, do the following: Get a price quote, such as, a "bag" of $1000 face value sells for, say, $5100. Then, divide that by 715, and you see how much you are paying for the silver, which, in this case is, $7.13. In this case, this is just right about at the spot price on the day I got this price quote.
2. 100 oz. collector bars, that typically cost anywhere from $50 over spot to 10% over the spot price.
3. 1 oz. "rounds" that also typically sell for just about 10% over the spot price.
The way to get silver close to the spot price is to buy a contract for 5000 oz. of silver from a commodities trader. You are buying a paper promise to get a paper receipt for five 1000 oz. bars in a COMEX approved warehouse. Each bar weighs just under about 70 pounds. There will be shipping charges, and commissions, that will ultimately bring the price up to perhaps 5% over the spot price.
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Here is an email I received that illustrates an important concept -- doing the hard work when investing:
Hi, The one thing that made me miss out on a few really great plays last year was simple laziness! I forgot the Biblical admonition that you should put 100% into all your endevours. There is no getting around the grind of ongoing due diligence if one wants to keep one's portfolio growing. Slogging through paperwork and websites is not as glamorous as a hot tip, but in the long run one will still be riding the bull while the mo-mo (or momentum) guys have been bucked off long ago.
I do appreciate all your hard work and that a Christian guy is having such a positive effect on PM investors. Between you and Mel Gibson there has been a lot of good discussion generated lately among the financially and spiritually lost.
This man was undoubtedly referring to points 2 and 3 in my recent article: Biblical Guidelines for Managing your Money
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Go see http://www.MARKETOCRACY.COM
See the performance of my marketocracy profile of silver stocks, here: http://tinyurl.com/24x2a
I strongly recommend that you set up a marketocracy fund yourself. It's better than paper trading, because their computer will keep track of your results and ongoing performance. It will teach you about the importance of diversification, and it will teach you to become a better investor. The first hurdle is that you need to know about 15-20 good stocks, and none can be "pinksheets" and none can be "Toronto" or "Venture Exchange" (Canadian) companies. Stocks must trade on the NYSE, NASDAQ, AMEX, or Bulletin Boards. The discipline of keeping your fund in compliance with the diversification rules (half the portfolio consists of stocks not more than 5%, and no one stock more than 25%) will teach you and force you to sell some of your favorite and best performing stocks when they move up, and then re-deploy the proceeds into stocks that have moved down, or not moved up yet. It is an extremely valuable skill to learn to sell the stocks that are up, and buy the stocks that are down. Diversifying your profits into stocks that have lagged is an especially good idea, and investment practice.
It will also help the entire industry, because if you do that, you will help smooth out prices, reduce volitility, and increase liquidity, all of which helps to invite bigger traders into the sector. The momentum guys who buy stocks because they are moving up, and sell stocks because they are moving down, are the ones who create the volitility, and the opportunity for the investor who buys and sells based on value, instead.
If you sign up at marketocracy, you can join the "Hommel silver stock club" which I just started. I don't know whether it will prove to be a popular gathering place to discuss silver stocks, or not.
The whole point of this week's commentary is to help the smaller investors to learn to stop playing the momentum game, and to start investing the "value" way. Buy low, and sell high, and do this repeatedly. Let the volatility between stocks be your friend, and take advantage of it.
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Leonard Kaplan is bearish on silver: Precious Metals Update for Markets of March 8th
Several people this week asked me to comment on his article.
His price prediction for a trading range for silver was proven wrong merely hours after his article came out, as silver exceeded $7.10/oz., the top of his trading range and hit $7.15/oz. at the close of March 9th, and hit $7.24/oz. the next day, on March 10th.
Leonard Kaplan was just as wrong a month ago, in his Feb 17th commentary at goldseek.com, when he said that his expected trading range for silver would be up to $6.80. Last time, he was also proven to be wrong in less than 24 hours, just like this time.
I believe his poor commentary on silver, and bad arguments, must be helping fuel the demand. After all, if what he says is all the bears have got to base their investment decisions on, the bears are in deep trouble.
His basic argument is that silver is NOT in short supply. I believe silver is scarce. I recently ordered over $100,000 in silver (over $350k total) from each of three very large and well-known bullion dealers, and none of them had silver in inventory. I got my orders filled, but they all had to order from someone else. I suppose such is common in the silver business, but think about that for a moment. People who make their living, their business, to buy and sell silver, often have less than $100,000 in inventory? That seems crazy to me. A hundred thousand dollars not even enough to buy a home in most parts of the U.S.A. now!
Get out your phone book, and call your local coin dealers. Ask them if they have even $25,000 in silver bullion in inventory right now. The answer is that they most likely do not. I have only been able to find 4 dealers (non COMEX guys) who have over $500,000 in silver. Part of the reason dealers don't have inventory is that there is so little demand for silver from investors. And if there is little or no investor demand today, what in the world is going to happen to the silver price when the trillions of dollars invested in the bond market begins to buy silver to protect their assets?
Mr. Kaplan argues that the speculators are driving the silver market unreasonably high. I disagree. The numbers of open contracts at the COMEX is not significantly different than it usually is. It's right over 100,000 contracts, like it has been for months, even years. According to my memory, at one time, there were over 180,000 contracts in silver back when silver was around $5/oz., and now there are less than 120,000. So paper long speculation is down.
Mr. Kaplan argues that the poor jobs report is what is driving metals prices higher. Again, I disagree. Silver has been screaming higher since June of 2003, not since the jobs report came out last week.
Mr. Kaplan argues that speculators hold paper contracts to buy nearly a year's worth of silver production. Yes, that has been the fact of the situation for a long time, even prior to the price rise since 2003. (100,000 contracts x 5000 oz. = 500 million oz.) But the opposite side is that the shorts have commitments to deliver those 500 million oz., and there is only 52.5 million oz. of silver registered for delivery at the COMEX. I hope the shorts have the difference, the 450 million oz. of silver. Is that much sitting somewhere in a warehouse that nobody knows about? Even if it were, it's not enough to satisfy the real monetary demand when it hits.
Now, are inventories of silver going up, or down? On the COMEX, they have been going up, as Mr. Kaplan notes. In fact, inventories were as little as about 70 million oz. for both categories (registered and eligible) at the COMEX years ago, and now they stand at about 123 million oz. at the COMEX. But what about inventories elsewhere? That is the question. Reports from Europe suggest that silver really is vanishing from inventories. I believe those reports, and Mr. Kaplan does not. I receive many letters from people all over the world telling me that they cannot get even small retail orders filled, without a month delay. People in Europe, New Zealand, Australia, all telling me that silver is in short supply, and that they have to wait months to get silver. Some are even saying that the European dealers and banks will not even take their orders, for fear that they can't get supply, or because silver is being rationed. What? Rationing? YES! What does rationing mean? It means only one thing, and one thing only, short supply.
I believe what is happening is that after a long, long time with little or no investor demand, that a very tiny bit of investor demand is beginning to re-enter the silver market. The previous channels of supply and demand are being reversed. For years, coin dealers would buy more silver than they sold, and so, they would end up shipping silver to the refineries. Now, coin dealers need to locate places to buy silver from, instead of selling it to someone. Everything is changing, and supply lines do not re-open overnight. Selling bullion is an extremely competitive business, with virtually no competitive advantage except for price. The only way to keep prices low, is to search everywhere for a willing and able seller of "retail investor" type silver. If all the dealers go to the same refinery to buy, there is likely going to be rationing, because a refiner only has what he has to sell, and no more. The problem the dealers thus have is that they remain unwilling to bid up the price to well over the spot price of silver to obtain silver for their customers, because they do not understand or believe that silver will continue to head up in price.
Here's another very juicy rumor I've heard. Back in 1980, the average size order was perhaps $2000 for silver. Today, the average size order is more like $40,000. No wonder the coin shops have no inventory, because if someone wants to buy that much, the average customer can take delivery of 1 full contract at the COMEX, and get it cheaper (5% over spot, instead of 10% over spot).
Why are things changing? In 1980, bonds were paying around 15% interest, and metal prices began to decline. People wanted paper bonds, not metal. Today, short term bonds are paying 1% or less, and metal prices are rising. It simply does not make sense to be in bonds paying 1% when silver is moving up over 50% in less than a year due to excellent supply and demand fundamentals, where industry still consumes more silver than mine supply each year.
In mid-2003, nobody wanted to hear about silver, because there was no trend indicating it was the place to be. Flat or declining prices drove people away, regardless of the fundamentals (with the exception of Warren Buffet who bought based on the excellent fundamentals). Now, with rising prices, the price trend is confirming the reports about supply and demand that the silver bugs have been preaching for years. And the mild investor demand is now creating confirming reports of silver's short supply.
Mr. Kaplan is very right about two things. First, the silver market will be driven by monetary demand, which he describes as the "speculative". Second, the silver market is, indeed, small when compared to the monetary world of fiat currencies.
Recently, a news report said that "gold is not liquid," because the central banks could not all sell their gold at once without moving the price down significantly, and that this realization that "gold is not liquid" is what caused the central banks to form the Washington Agreement, where they agreed to not sell more than 2000 tonnes over 5 years, and then renew this agreement this year. However, this same argument is even more true about fiat currencies--that they are not liquid, far less liquid than gold. After all, nations cannot sell trillions of dollars and buy gold without causing a crash of the value of their currencies, and driving up the price of gold to tremendous heights.
Gold may go down to $250/oz., if all the central banks sold gold all at once. But gold will be driven to infinity dollars per ounce if all the central banks try to buy gold all at once. Gold can never go to zero value. Excessive and fraudulent paper promises always return to their intrinsic value of zero.
I believe Mr. Kaplan will be wrong again, and that silver will soon hit or exceed $12/oz. later this year. The silver market is so tiny, and available money so large, that it is inevitable. --Especially now that we have a strong price trend in place to pull momentum investors on board.
Ultimately increased prices will not increase supply until and unless miners mine more. Look carefully over this list of primary silver miners. The vast majority of these miners are explorers that are not producing anything, and they will not be producing anything for a long time.
The cycle goes as follows:
1. Identify a prospective property--takes months.
2. Do due diligence on it--takes more months.
3. Negotiate a contract to buy the property--takes more months.
4. Present the property to your investors who financed the company and then engage in advertising to get the "market value" for the shareholders--takes more months
5. Then engage in a round of financing which requires talks and presentations to investors and plenty of hectic paperwork--takes another month or so.
6. Then go out and contact some geologists to do a report on where best to drill--takes more months.
7. Then hire drilling companies to do exploration work--takes more months.
8. Then hire some geologists to interpret the drill results and do extremely complex computer modeling--takes more months.
9. Then do another round of advertising to get the drill results out to the investing public, so as to be able to do another financing at a reasonable stock price. --takes more months.
10. Then, do a financing for more drilling and if they are lucky, they will eventually produce a report on a resource calculation after a few years of drilling.
11. Then, do another much bigger round of financing to construct a mine, and then build the mine... This all takes a very long time, and it does not even make much sense for large capital investments in mine construction unless and until it can be proven that $7/oz silver is here to stay--and we are not there yet.
No, I predict there will be no unexpected large silver supply coming from the mines anytime soon. A few existing small mines may re-open, and that's about it.
And where is the industry in the cycle right now? Mostly, people like me and you are still trying to identify some of the best prospects to buy, and so are the companies, as they are continuing to buy up silver properties. The silver companies are buying properties, and doing due diligence on them. Very few silver mines are being opened up and producing, and those that are, are adding very little production in comparison to the overall picture of mine supply.
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Now, enough arguing with Leonard Kaplan. I have been very wrong recently, too. I bought IMR.V at $3.68 Cdn/share, at about the absolute peak about a week after they announced drilling results, about a month ago. Since then, the stock has declined about 40% to as low as $2.18 Cdn/share! So, short term, so far, I have been very wrong. But the only thing I could do was buy more at this new low, and so I did.
Even larger traders can buy about $50,000 worth of IMR.V right now (as of Thursday March 11) without moving up the price, and we can buy it while it's cheap. I think it went down because the typical mining stock cycle seems to be that people buy hard right after drilling results are announced. Then, they try and all sell at the peak, and assume the price has topped out, and that the opportunity for quick gains is gone, and so they leave. At the moment, the IMR.V stock price seems like it may be hurt by the market's perception of a lawsuit. I've looked at the news reports on this at mineweb.com, and I don't think the claims have merit, and I think they will be dismissed in court. Even when I was not an IMR.V shareholder, I did not think the claims had enough merit to report in the company profile, (I thought it was akin to mud-slinging), even though a few people asked me to mention it. But if a stock goes down due to investor concerns like these, this is exactly the kind of thing that creates good buying opportunities--when other people panic.
Now, I don't normally say which companies I'm buying, not even to my subscribers who get a look at my portfolio, but in the case of IMR.V, I don't mind, because the market cap is so large, it probably will not affect it if I "spill the beans". It's also a very well known company, and the price for the stock certainly did not move up when I first mentioned I owned shares in IMR.V a few weeks ago.
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I was quoted here (I don't know the writer, and found this by chance):
http://www.thecouriermail.news.com.au/common/story_page/0,5936,8912850%255E462,00.html
Excerpt:
Jason Hommel, who produces a California-based weekly silver report for investor clients, wrote last week that silver stocks around the world were cheap because traders had ignored them while prices stayed low - and pure silver-only mining operations simply have not paid over the past 24 years.
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See my new article: Biblical Guidelines for Managing your Money
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
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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 !
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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 (will accept small retail orders, as small as you want.) 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.
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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.
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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.
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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.
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A great overview on silver: Douglas Kanarowski's 78 Approaching Forces For Higher Silver Prices
See also Douglas Kanarowski's article: What Impact Will Digital Photography Have on Silver?
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See the 600 year silver chart to see how undervalued silver really is:
http://goldinfo.net/silver600.html
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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.
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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.
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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.
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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) $364,000,000: 52.5 mil oz. of registered COMEX silver @ $ 7.03 /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.
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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 "
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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 "
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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.
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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 (that Yahoo! finance does not have boards for) is stockhouse.com
Click on "Bullboards".
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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.
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(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.
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(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
@ $7.63/share
$839 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 / $7.03/oz = 17.5 mil "silver equiv" oz.)
18 + 36 = 54 mil oz.
$839 mil MC / 54 mil "oz." = $15.54/oz.
You get "approx" .45 ounces in the ground for 1 oz. silver's worth of stock.
Additional comments: 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 18 mil oz. of physical silver, they might end the silver manipulation, and significantly boost their own profitability.
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
Some have noted that HL stock is now lagging the silver price. Sometimes, they use this as an indicator that the silver price might not continue upwards. I think that's hogwash. I think HL stock is lagging because it is the most expensive silver stock on my list that I know of, the most expensive by far, whether you value by PE ratio, or by resources in the ground. Therefore, the lagging share price for HL may reflect not an anticipation that silver is headed down, but rather, the realization among market participants that HL is overvalued relative to all other silver stocks. After all, that's what that means when HL was downgraded from Sector Perform to Sector Underperform, which happened on Jan 6th by CIBC, which was about the peak on the HL price chart.
Under-priced silver stocks continue to outperform in a shocking way, as share prices of silver juniors skyrocket.
ABX (Barrick)
http://www.barrick.com/
535 million shares
@ $21.29/share
$11,390 million 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."
$11,390 million Market Cap / 1710 mil oz. = $6.66/oz. silver
You get "approx" 1.05 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, yet their cash has dropped from $2 billion down to $1 billion. It could be due to the hedging, locking in precious metals prices at low prices, and/or hedge covering that explains the monetary loss in the light of their low cash costs.
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)
@ $7.04/share
$1478 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)
$1478 mil MC / 224.7 mil oz = $6.58/oz.
You get "approx" 1.1 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.
I got an email this week complaining to me that I don't understand CDE's exploration potential. True, I probably don't. I just don't see why I should even bother to look, considering their high market cap. Let's put it this way... CDE would need to have an exploration potential to get at least 20 oz of silver per oz. of silver's worth of market cap to grab my attention. For CDE, this means that at 211 mil oz of silver value in market cap, they would need 20 times that in silver exploration potential, which is 4 billion oz. To be honest, I don't think they have that kind of exploration potential, so their valuation does not attract me. And if they did have the potential to find 4 billion oz. of silver, I think we would all know about it, because with CDE's cash, they'd have enough to advertise it to all of us, and it would not be a secret. Honestly, I think the man was just upset because I'm not ravingly bullish on the silver stock he owns.
IPOAF.PK (INDUSTL PENOLES)
http://www.penoles.com.mx
397.5 mil shares outstanding (2002 annual, unchanged since 2001)
@ $4.45/share
$1,769 mil MC
419 proven and probable reserves of silver (from 2002 annual report on website)
$1,769 mil MC / 419 oz. silver = $4.22/oz.
You get "approx" 1.66 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.
The word late Feb. is that Penoles has hedged several year's worth of silver, that is, they have locked in contracts at set prices. Set when prices were lower. How much lower, and at what price, is anyone's guess. As reported at lemetropolecafe.com, "We know the market is so tight even the world’s largest silver producer, Mexico’s Penolas, wasn’t thrilled about supplying 1 million ounces for a special project with ECU Silver, led by their extremely able CEO Michel Roy."
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'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.
SIL (APEX SILVER)
http://www.apexsilver.com/
information@apexsilver.com (303) 839-5060
45,023,760 ordinary shares outstanding. (Jan 30th press release)
@ $21.58/share
$971 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
$971 mil MC / 454 mil oz = $2.14/oz.
You get "approx" 3.29 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. One key problem standing in the way is that there are position limits on paper longs, and thus, APEX could not probably 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 for higher silver prices, 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.
$364,000,000: 52.5 mil oz. of registered COMEX silver @ $6.95 /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.)
CFTN.PK (CLIFTON MINING)
http://www.cliftonmining.com/
clifton@cliftonmining.com 801-756-1414 (303) 642-0659 Ken Friedman
45 mil shares fully diluted (Oct. 2003)
@ $1.91/share US
$86 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"
$86 mil MC / 42 mil oz. = $2.05/oz.
$86 mil MC / 1000 mil oz. = $.09/oz.
You get "approx" 3.42 ounces in the ground for 1 oz. silver.
Exploration Potential: 78
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.
See the human study data released on their colloidal silver product:
Clifton Mining Company - New Human Study Data Released
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)
@ $.59/share Cdn x .75 US/Cdn = $.44
$45.7 mil MC
http://www.ecu.qc.ca/reservesen.html
See the url above for the numbers from the company's website, which are:
Proven & Probable & Possible: 7.6 mil oz silver, 93,000 gold. = 8.5 million "silver equiv" using my method of counting gold as 10:1
"Potential" total: 21.2 mil oz silver, 221,000 oz. gold.
According to my valuation method, that's 2.2 mil oz. of "silver equiv" for the gold, plus the 21.2 mil oz. silver, for a total of 23.4 mil oz.
Exploration potential:
From http://www.ecu.qc.ca/english/pdf/Annual_rep.pdf
page 6 (or 8), the company says: "Exploration will mainly be targeted to verify the silver-bearing potential of certain properties, in line with the objective of increasing our reserves from 37 million to 100 million silver-equivalent ounces." (note, the 100 mil oz. "silver equiv" spoken of by the company undoubtedly counts gold as silver at the normal ratio, not my 10:1 ratio. Therefore, my 23.4 mil oz. re-calculation is 63% of their 37 mil oz. number, and so, likewise will I count 63% of their 100 mil oz. target)
ECU.V is also exploring other gold properties.
$45.7 mil MC / 23.4 mil oz. silver equiv. = $1.95/oz.
$45.7 mil MC / 63 mil oz. silver equiv. = $.60/oz.
You get "approx" 3.60 ounces in the ground for 1 oz. silver's worth of stock.
Exploration potential = 9.7
Additional comments: See also regarding ECU's exploration potential: http://www.ecu.qc.ca/indexen.html
ECU recently recovered title to properties that were in dispute. See: http://tinyurl.com/x691
MFN MFL.TO (MINEFINDERS)
http://www.minefinders.com/
Shares Fully Diluted 34.1 mil (Late 2003?)
@ $9.48/share
$323 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 convers
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