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-- Posted 8 May, 2004 | Digg This Article
FRIDAY, May 7th, 2004
This week's report lists 108 silver stocks. There are 31 silver stocks that list reserves, resources (and exploration potential.) which I calculate by using my "ounce in the ground" forumula. There are 50 explorers. There are about 27 additional "silver" stocks with incomplete information. Additions & Changes from last week are in bold.
If this is the first time you have seen this report, please try to read the entire report before sending me an email. This report goes out now to over 8900 investors each week in email.
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
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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 essay, Biblical Guidelines for Managing your Money
Kitco reports silver at $5.56/oz. as of Friday, 7:00 PM West Coast US, which was used to calculate the following figures. The CAN $ / US $ conversion factor is .7232. I will use .72 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")
- ABX (BARRICK) 1 even --infamous hedger (18 mil oz. gold hedged, 3 yrs production) hedged?
- IPOAF.PK (INDUSTL PENOLES) 1.6 down --current producer, mostly family owned, hedged?
- CDE (COEUR D'ALENE) 1.4 up --current producer, (gold bonus) in debt.
- SIL (APEX SILVER) 3.7 even --large zinc bonus, low grades, cash rich--$345 million! in debt
- GRS GAM.TO (GAMMON LAKE) 3.6 up --current producer, owns 26% of Mexgold
- CFTN.PK (CLIFTON MINING) 4.0 up -- (94 EXPT) (colloidal silver patent bonus)
- FSR.TO FSLVF.PK (FIRST SILVER) 4.9 down --current producer, (not profitable '03 3rd q.) unhedged
- PAAS (PAN AMERICAN SILVER) 5.0 up --current producer, in debt.
- MFN MFL.TO (MINEFINDERS) 5.3 up --significant gold bonus, $35 mil cash on hand.
- KBR.V KBRRF.PK (KIMBER RSCS) 5.6 down A one property company, high grades, with exploration potential.
- HGM.V HOGOF.PK (HOLMER GOLD) 5.7 down --silver project in cuba, large gold project bonus.
- ORM.V OREXF.PK (OREMEX RES) 5.8 up (24 EXPT)
- MGR.V MGRSF.PK (MEXGOLD RSCS) 6.1## up (##exploration target) -- bonanza grade discovery on Jan 13th
- * TM.V TUMIF.OB (TUMI RSCS) 7.4 down -- (15 EXPT) recent bonanza grade silver discovery
- WTZ WTC.TO (WESTERN SILVER) 7.7 up -- (26 EXPT) large mine development cost. copper & zinc bonus
- SSRI SSO.V (SILVER STD RSC) 8.7 up --multi-property company, understands silver story
- SRLM.PK (STERLING MINING) 9.9 up --(26 EXPT) acquired the Sunshine in Cour d'Alene
- CZN.TO CZICF.PK (CDN ZINC) 10.9 down --large zinc bonus, high grades, low start up costs, great EXPT
- GGC.V GGCRF.PK (GENCO RESOURCES) 13.4 down
- CHD.V CHDSF.PK (CHARIOT RSCS) 13.9 up (explorer, with inferred resources)
- RDV.TO RDFVF.PK (REDCORP VENTURE) 16.5 down --60% gold bonus
- FAN.TO FRLLF.PK (FARALLON RSCS) 18.4 down --(31 EXPT) low grades, silver 1/3; also gold & zinc bonus.
- ADB.V ADBRF.PK (ADMIRAL BAY RSCS) 19.3 down --actively expanding resources. (Huge gas bonus)
- * PLE.V (PLEXMAR RES INC) 20.8 up
- HDA.V (HUSIF?) (HULDRA SILVER) 21.3 up --very tiny, no debt, zinc bonus, low start up costs.
- * MGN (MINES MGMT) 25.8 down --60% copper bonus (low grades), start up cost ~ $250 mil
- * SVL.V STVZF.PK (SILVRCRST MINES) 26.5 down --(44++ EXPT) --(Silver in Honduras) ++
- EXR.V EXPTF.PK (EXPATRIATE RECS) 28.2 down --significant zinc bonus 60% zinc, 25% silver
- ABI.V ABMBF.PK (ABCOURT MINES) 29.3 NEW --large zinc & small gold bonus
- ASM.V ASGMF.PK (AVINO SILV GOLD) 32.6 down --owns 49% of the Avino +4 other silver props. (silver bonus)
- UNCN.OB (UNICO INC) 55.6 down --lease expiring on largest property, June 1 2004.
* = I own shares
Explorers (by market cap, in millions):
- HL (HECLA MINING CO) .33 down --current producer (gold bonus) cash rich.
- SPM.V SMNPF.PK (SCORPIO MINING)
- * IMR.V IMXPF.OB (IMA EXPL)
- EZM.V EZMCF.PK (EUROZINC MINING)
- CDU.V CUEAF.PK (CARDERO RSCS) 50-84 "exploration potential"
- AOT.V ASOLF.PK (ASCOT RSCS) -- owns percentage of Cardero, CDU.V
- MCAJF.PK (MACMIN LTD)
- * FCO.TO FCACF.PK (FORMATION CAPTL) Cobolt (and Sunshine silver refinery)
- * MMGG.OB (METALLINE MINE) --zinc/silver (historic high grade silver) (low cost revolutionary oxide zinc process)
- TVI.TO TVIPF.PK (TVI PACIFIC) --current producer of a dore silver bar 96% silver, 4% gold
- * OTMN.PK (O.T. MINING) very large exploration potential
- * FR.V FMJRF.PK (FIRST MAJESTIC) -- Bought a former silver producer. Acquiring silver properties.
- * NPG.V NVPGF.PK (NEVADA PAC GOLD) 32-158 "exploration potential" (owns 1 silver property, 10 gold properties)
- MAG.V MSLRF.PK (MAG SILVER)
- IAU.V ITDXF.PK (INTREPID MINRLS) 7 "exploration potential"
- ECU.V ECUXF.PK (ECU SILVER MINI) 4.1 down --(11 EXPT) --50% gold bonus
- CAUCF.PK (CALEDON RES)
- MMM.TO MMAXF.PK (MINCO MINING)
- MAI.V MNEAF.OB (MINERA ANDES) (gold bonus)
- QTA.V QURAF.PK (QUATERRA RES)
- * EDR.V EDRGF.PK (ENDEAVOUR GOLD) A PRODUCER (I could not yet find a listing of resources or reserves)
- BZA.V ABZGF.PK (AMER BONANZA)
- DNI.V DMNKF.PK (DUMONT NICKEL) exploring Clifton's property
- EXN.V EXLLF.PK (EXCELLON RSCS)
- BCM.V BCEKF.PK (BEAR CRK MINING)
- NJMC.OB (NEW JERSEY MIN)
- * CMA.V CRMXF.OB (CREAM MINERALS) 222 "exploration potential"
- * KG.V KDKGF.PK (KLONDIKE GOLD)
- * CBE.V CBEFF.PK (CABO MINING) --Historic Silver and Cobalt district
- SML.V SMLZF.PK (STEALTH MNRLS)
- NBG.V NBULF.PK (NEW BULLET GP) 42 - 115 "exploration potential"
- SDR.V SDURF.PK (STROUD RSCS)
- CHMN.PK (CHESTER MINING)
- EPZ.V ESPZF.PK (ESPERANZA SILVR)
- GNG.V GGTHF.PK (GOLDEN GOLIATH) --Historic silver district in Mexico
- GPR.V GPRLF.PK (GREAT PANTHER)
- MMG.V MMEEF.PK (MCMILLAN GOLD)
- SHSH.PK (SHOSHONE SILVER)
- * KRE.V KREKF.PK (KENRICH ESKAY)
- EGD.V EGDMF.PK (ENERGOLD MINING)
- PCM.V PAOCF.PK (PAC COMOX RES)
- LEG.V LEGCF.PK (LATEEGRA RSCS)
- BGS.V BLDGF.PK (BALLAD GLD SLVR)
- * AUN.V AUNFF.PK (AURCANA CORP)
- SRY.V (STINGRAY RSCS)
- TUO.V TEUTF.PK (TEUTON RES)
- ASLM.PK (AMER SILVER MINI)
- BBR.V BBRRF.PK (BRETT RES)
- ROK.V ROCAF.PK (ROCA MINES INC)
- CBP.V CPBMF.PK (CONS PAC BAY MIN)
* = I own shares
Silver oz. "in ground" means and 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 into buying shares in the company at current prices. Here's the math on how to get it. 1. Get a market cap in U.S. dollars. Divide that by the silver price, so the market cap is denominated in terms of silver ounces. Then, divide the ounces in the ground by the market cap as denominated in silver. This tells you how many ounces of silver in the ground you are buying when you give up one ounce of silver in you hand for shares of stock, instead.
(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.
I believe that the two most important numbers that a silver mining company can report are the resources in the ground, and the number of their fully diluted shares. Of course, there is much more to a mining company than that, but without those numbers, it is extremely difficult to even start an evaluation. This report highlights those key numbers, where possible. If you think those numbers are also important, please email the executives of the mining companies you own, and ask them to make sure their numbers are clearly published at their websites.
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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If I use a word you don't understand and is not listed in the dictionary at www.m-w.com you can look up the meaning at http://investorwords.com/
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WEEKLY COMMENTARY (All new in this section):
Interest rates!
At the present time, there are quite a few mainstream commentators who are suggesting that if interest rates go up, it will be bad for gold and silver. I wonder if this story, repeated in the mainstream press, is responsible for the downturn in precious metals? It might, but if so, I strongly suspect this is the last time we will see these low prices for gold and silver. It's as if the full power of the press is now beginning to discredit gold and silver, so as to create an entry point for a very powerful and very wealthy buyer. Did you read in the last few weeks how the Rothschilds are quitting the gold fix? I believe this means they will no longer work to suppress the gold price, which I believe means they are likely ready to buy gold and silver for themselves.
I think the story about how rising interest rates will be bad for gold and silver is utterly ridiculous. In the last year, silver has moved up 50% to 100% from $4.20/oz. to $6 or $8.40. Gold has moved up from $250 to $400 over the last two years, a gain of 60%. Why would anyone who has enjoyed such gains move into bonds paying 5%? Any idiot can see that 5% is much less than 50% or 60% or 100%.
Can the "risk free" nature of bonds make up the difference? Absolutely not! Bonds have many more risks that gold and silver do not. First, there is currency risk, as inflation can wipe the value of bonds, and currencies, to zero. In contrast, it is impossible for the value of gold and silver to drop to zero. Second, there is default risk, as those who would repay bonds may be unable to do so.
For example, Ford Motor Company is $180 billion dollars in debt, and only has a market cap of $27 billion. If it were realistic for Ford Motor Company to repay that debt, by, for example, earning, say, 10% of their debt, which would be $18 billion each year, it would take 10 years to repay it all, (at zero interest), and the market cap of Ford would likely be about $180 to $360 billion, which it clearly is not. Therefore, it is more realistic to consider that Ford will eventually default on their bonds. Sure Ford can make payments on the interest at the present time, especially if they are allowed to float more bonds and refinance at low rates. But if rates climb significantly? Ford will probably default on their bonds. Ford motor company will not go away or lose the name, it will likely just be reorganized. After bankruptcy, the shareholders will typically get nothing, and the bondholders will be issued stock in the company. It's a lot like the bank re-possessing your house if you stop making payments. The house does not explode, the house still exists, it's just owned by someone else afterwards.
I'm not trying to pick on Ford Motor Company. General Motors is in the same situation, but even worse. GM has a market cap of $25 billion and has a debt of $280 billion. GM is actually selling for less than the cash they have on hand, as they have $28 billion in cash. But with that debt of $280 billion, who cares? GM's cash is 1/10th of the debt. But how can that debt be repaid unless there is massive inflation? And if GM is counting on massive inflation to save them, then GM should take that $28 billion and start buying silver and silver stocks!!! Of course, they won't be able to spend even $1 billion on silver without moving up the price tremendously, because there isn't that mush available on earth, but that's the point. The point is that by taking this course of action, GM could at least help to cause the inflation that may save them! As GM has tried to "transform" itself into a finance company, by issuing credit cards and doing mortgages, they should at least do the wisest thing in finance right now, which is to buy silver and silver stocks!
The important point to remember is that if the trend for interest rates is up, then the value of risky bonds will be going down, because bond values move inversely to the interest rate. If interest rates are headed up, and bond values are going down, then it must mean that people will be selling bonds. It is such selling pressure on bonds that moves bond interest rates up in the first place! Now, where will they put that money from the sale of their bonds, and how much money are we talking about? If you have been paying attention each week, I have a little chart below that lists such figures, and here are a few of them, that illustrate the relative size of the bond market compared to the precious metals markets:
$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
$2,572,160,000,000: Marcos/Phillipine "black/unofficial" gold: 200,000 (to 500,000) Tonnes @ $400/oz. (Book: "Gold Warriors")
$1,860,000,000,000: World "official" gold, 145,000 T @ $400/oz. http://tinyurl.com/vrcc
$100,000,000,000: all the world's gold stocks (estimated?)
$75,000,000,000: Money flowed into Equity funds in the first quarter, 2004
$7,090,000,000: all the world's silver stocks (59 of them on this list, as of Dec. 5th, 2003) (Perhaps $10 billion by April?)
$1,225,000,000: 49 mil oz. of registered COMEX silver @ $25.00/oz. http://tinyurl.com/vrcw
Thus, if interest rates are headed back up, due to inflation, and bond values are headed down because people will be selling bonds, what will they be doing with the proceeds? Hold cash during inflation? Not likely. They will buy gold and silver. And as you can see, the size of the gold and silver markets will not be able to withstand the buying power of even a paltry $1 trillion dollars, without prices of gold and silver heading up like crazy.... such as to $3000/oz gold and $300/silver just for starters, or perhaps even driving the value of paper money completely to zero!
Look in my chart above, about how much the money flowed into Equity funds, first quarter, 2004. It's $75 billion. At times in history, silver stocks were the most popular investment class. Look again at that money flow compared to the figure below it. One day, the most popular thing to buy will not be equities, but it will be silver stocks. Look again at the relevant comparable figures. Money flow: $75 billion. Silver stocks: $7 billion. Imagine $75 billion each quarter trying to buy $7 billion worth of silver stocks. That's where we are headed as interest rates go up, and bond values crash. Get the picture?
And of course, as interest rates go up, the value of shares in companies in debt like Ford and GM will also crash. With bonds and stocks ready to crash, where will people put their money? Silver and gold!
Metals prices will be heading up 100% or more each year from now. Bonds will not be an attractive alternative to precious metals until interest rates are in excess of 100%. And that would still not tempt me, because I will most likely continue to enjoy 300% to 1000% annual gains in silver stocks.
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Real Estate!
My parents are heavily invested in real estate. So I have discussions with them from time to time about the merits of real estate verses silver bullion. Here are a few of the recent arguments.
I said that real estate is a bubble, propped up by excess government loans, coming primarily from Freddie Mac and Fannie May. I think this source of money for real estate is uneconomic, and unsustainable. Who, in their right mind, would loan money at 5% rates for 30 years, when inflation (as measured in gold and silver) is roaring along at 30% to 50% to 100% per year? They agreed that investing in bonds is a bad deal. They agreed that the dot-com bubble was based on "uneconomic and unsustainable" business plans. They did not see the connection.
They remembered the Savings and Loan Crisis in the early 1980's, which was the bust of the home lenders after gold prices had risen in the 70's. Again, they did not see the connection.
I said, look, one of the greatest market crashes of all time was the stock market of 1929, that started the Great Depression. The market crashed because the government was creating too much money, and too many people were using that artificially created money, and they borrowed that funny money to invest in stocks. Today, it's the same thing as so many people are using borrowed government funny money to buy homes!
There was nothing I could say that would convince them to sell real estate. One of their justifications was that, they said, "You know bullion, we know real estate. You invest in what you know." I said, no, you don't know real estate at all, because how is it economically justifiable to loan money at 5% when inflation is running at up to 50% or 100% in gold and silver? (Silver's rise from $4.20 to $8.40 is 100% annual inflation.) They had no answer.
Another of their justifications was that, "We know most people borrow money for homes, but we are planning on paying off all of our rental properties within 10 years." I countered, "Who cares if you own it outright? That does not mean the values are not still inflated due to the heavy borrowing of all others! Investing in stocks in 1929 with fully paid-for positions would not have been a great idea either. You just don't buy over valued assets, don't you get that?" Again, they had no answer.
Another of their justifications was that, "We will be receiving rent income from our rental properties that we will own outright, with no payments, and we can live off of, and retire on, the rental income." I said that's still no excuse to own overvalued assets.
Another of their justifications was that since real estate is so overvalued in more wealthy areas, those people are moving out of such an area, and moving into the more middle-class real estate area, thus helping to boost home values in the middle class area. This kind of thinking astounds me. Here is proof of a real estate bubble, because even the wealthy people, the "smart money" recognize the problems, and are now scaling down their holdings of real estate! This is proof of a market top, in my opinion, and is not a sustainable source of market demand.
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One of my friends from college, who has done very well for himself in business, has been buying silver and silver stocks for about the last year or two, based on my recommendations. He's done very well, obviously. He bought his first real estate in about 1998. Finally, he decided to sell one of his properties, and invest the gains in silver, and silver stocks. To him, I say, "You'll be happy you sold!" His home was on the market as silver was up towards $8.40/oz., and he was feeling he almost missed his chance to get great prices. Today, his home was sold, he is cash rich, and extremely happy that silver moved back to about $6/oz., and he is buying in at such low prices.
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Now, let's think for a moment about an economy, and think what an economy needs for people to be most productive, and wealthy.
If housing costs are high, that's a problem, because everyone needs a place to live. It is not good for a "need" to be expensive. If housing costs are high, then a large portion of a family's budget will go toward paying for housing, which means they will have less money for other things. High housing costs are even worse when people are required to borrow money for a house, because typically a person will pay for a home three times over during the course of paying back a 30 year loan. Therefore, paying three times more than the purchase price for a house, that is expensive in the first place, is really, really, really bad for an economy.
In God's economy, when the nation of Israel went to the promised land, the land was distributed to each man, and each man had a portion of land, for free. The USA was founded the same way. The west was settled by the give-a-way of free land.
High land prices are also hurtful for businesses that provide services. If land costs too much then every commercial enterprise has to make a lot of money to pay the rent, or otherwise they go out of business. If businesses are squeezed with high rent costs, then the customers have to pay higher prices for goods and services, which, again, is bad for an economy, as high prices for things people need is not very economical.
Now, in contrast, if precious metals prices are high, who would be hurt? In theory, nobody, because nobody "needs" any specific set amount of precious metals, (except, of course, for a few industrial users). You can't eat gold, as the gold detractors have said, but this is precisely the reason that precious metals can be expensive, without hurting anyone. The ones who are primarily hurt if precious metals are high are those people who are in debt to pay back loans in precious metals. (And, of course, the government printing press and the banks.) For the average person in an economy, however, it does not matter whether an ounce of gold is $300 or $30,000. Either way, a person will receive a day's wage for a day's labor. Actually, the higher the prices for precious metals, there are many beneficial effects. First of all, there will be plenty of mining jobs, which are typically highly skilled well-paying jobs. Secondly, precious metals become much lighter, and thus easier to use in commerce. It is much easier to use silver in commerce when a day's wage is a piece of silver the size of a dime. Today, however, a day's wage is $100, which, divided by $6/oz., means 16.6 ounces of silver, which is rather inconvenient in terms of weight and size. (And proves that silver is cheap and undervalued.)
A friend wrote to me that in 1915 a friend of his worked for a dime a day. A Canadian dime of .925 silver is .06 of an ounce for a days pay. If a journeyman gets paid $200 dollars per day or .06 ounce/silver what should the silver price in ounces be? .06 x 16.7 = 1. 16.7 x 200 = $3,340 for an ounce of silver!
Therefore, not only will housing prices come down, way down, and precious metals prices head up, way up, both movements will be much, much better for the economy overall.
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Producers! It seems most investors who first understand the silver story will want to own a silver producer. They expect this will help them get the quick profits. Wrong! Most silver producers are way overvalued. They sell at up to 30 times earnings. This means you'd have to wait 30 years to get your money back, in terms of earnings. That's a long time. It's almost as bad as investing in a bond paying 5%! In fact, a company with a P/E ratio of 30 is the rough equivalent of a bond paying 3.3%!
The most popular silver producers, like Hecla (HL) have had a market cap of up to about a billion dollars recently, and they produce about 9 million ounces a year. I'd rather own an explorer, that has plans to become a producer rather in a year or two, that might produce, say, about 2-4 million ounces of silver, but be valued at only about $30-$100 million. (There are a few companies on this list that fit into that category. Please don't email me to ask me which, read this report!)
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Here is an outstanding article published this week:
What Gold and Silver Analysts Overlook - Dr Fekete
Dr Fekete's article is summarized at http://www.goldisfreedom.com as, "Professor Fekete says analysts are overlooking falling basis as a cause of coming backwardation in gold and silver markets."
Dr Fekete emphasizes that gold and silver are money, and do not behave as other commodities might behave in the market place. He says that gold and silver may get more expensive in the spot market or the current contract month than in future months, which is called "backwardation". This would mean that market participants are losing trust in the viability of the exchange, and would tend to realize there is a greater risk of default in the futures contracts. Eventually, it could wind up where the spot price for gold and silver in the cash markets trades very high relative to the futures markets, and this would likely happen right before a default in the futures market. Here are excerpts from his article, a few of what I consider his most important paragraphs. Dr. Fekete writes:
Backwardation is abnormal, yet it may occur. When it does, the regime of irredeemable currency will start to crumble. People in trying to save their financial future will take flight to the monetary metals. They will scramble to mop up the dwindling supply that is allowed to trickle down. Then all of a sudden all offers to sell the monetary metals are withdrawn. Supply goes to zero, facing an infinite demand. That such a development is not fanciful but a true description of economic reality as it unfolds is confirmed by history. Supply of the monetary metals went to zero and demand to infinity many times before, in France (the assignat and mandat inflations), in the United States (the continental inflation), in Germany (the Reichsmark inflation), to mention but a few of the notable cases.
...
Moreover, previous episodes of hyperinflation affected isolated countries which had embraced the regime of irredeemable currency out of desperation, while the rest of the world stayed the course of monetary rectitude. In the present situation the entire world has been inflicted with irredeemable currency. There are no gold standard countries around that could lend a helping hand to countries that want to stabilize their currency. My description of hyperinflation is not in terms of the quantity theory of money, but in terms of a model where the relentlessly declining gold basis leads to backwardation destroying the gold futures market. When all offers to sell cash gold are withdrawn, producers of essential commodities such as grains and crude oil refuse payments in dollars, and demand gold in exchange for their product. The dollar and other irredeemable currencies will go the way of the assignat. Backwardation in gold should therefore be considered the self-destroying mechanism for the regime of irredeemable currency that “only one man in a million may identify and understand” (my thanks to Keynes for the felicitous phrase). This is where supply/demand analysis is utterly useless. The huge stocks of monetary gold are still in existence, yet zero supply confronts infinite demand. Several people have written to me, saying they either do not understand what I mean (or they claim I have no credibility) when I say that gold and silver prices can go to infinity dollars per ounce. I'm saying the dollar will one day be utterly worthless. You would not be able to buy any gold, or any silver, no matter how many pieces of paper money you are holding in your hand, because eventually it will be too widely recognized that dollars are, well, worse than used scrap paper--because dollars even smell bad.
Dr Fekete is, indeed, suggesting that once the futures markets seize up due to defaults, we will have runaway prices for gold and silver in terms of any paper money anywhere in the world. Or, it might be the other way around, that we will have runaway prices for gold and silver in terms of paper money right before the futures markets default. The point, as I see it, is that gold prices could one day be trading higher and higher, up to about $600/oz, or even $1500/oz., and then the futures markets default just as the physical markets seize up with no trading. Described another way, gold could "gap up" from about $1000/oz. to infinity per ounce as the futures markets default.
Since the governments of the world stopped redeeming their currencies in terms of gold, the futures markets have assumed the role of the last place to go if you want to get real gold and silver for your paper money. Once that exit door closes, and that pricing mechanism is discredited and closes up shop, there will literally be no place on earth to go to in order to buy gold and silver in terms of paper money. And in that event, we may well see all paper money on earth become utterly worthless in a matter of days or weeks.
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At present, there is still not a single silver mining company that has announced that they will be stockpiling silver, or have stockpiled silver, to use it in place of a stockpile of paper money. Clearly, silver prices are thus at rock bottom, if not even the silver mining companies are using silver as money.
When this changes, when silver miners begin to use silver as money, it will be a clear signal of a major bull market move.
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This was a very positive article on silver, despite the title.
FOCUS: Debunking The Warren Buffet Rumor On Silver
By Jim Hawe
Of DOW JONES NEWSWIRES
http://sg.biz.yahoo.com/040506/15/3k1ga.html
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You may have noticed a new link at goldismoney.com regarding asset protection. I figure some of my readers may be interested in learning how to legally protect your assets from lawsuits and creditors.
Obviously, the entire point of investing in physical precious metals is that they are the ultimate way to protect your assets. Gold and silver in your home safe are "off the books". And the value of gold and silver cannot go to zero. So precious metals investors are probably already interested in protecting their assets, which is a very good reason to own precious metals in the first place.
But what about your brokerage accounts of your silver stock holdings? How safe are they, legally, from seizure? We must understand how to keep the wealth we have, and keep it safe, and protected from lawyers, tax collectors, scam artists, sue-happy people, and other thieves… which is what asset protection is all about.
Let's look at some statistics. More than nine out of every ten lawsuits in the world are filed in the United States. It is estimated that 80,000,000 lawsuits are filed every year in this country. This means that if a person or business entity earns more than $50,000 per year, they will be named as a defendant in a lawsuit, on average, once in four years! And if that's average, some will be sued more often (and others less), of course, depending on the risk of the business or profession.
Although the USA has less than 5 percent of the world's population, America has more than 70 percent of the world's lawyers. And it's getting worse. According to recent statistics from the American Bar Association, there are currently more than 1,000,000 practicing lawyers in America. And there are nearly 150,000 students presently attending law school. When they get out of school, the only way some of them will ever make any money is to sue people.
Protect yourself with gold and silver. And protect your brokerage accounts by learning about asset protection. (IRA accounts are already very safe from seizure.) For more info, see: http://www.trustmakers.com/index3.html
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PRECIOUS METALS EMERGENCY
Copyright MAY 2004 Charles Savoie
http://www.silver-investor.com/cs_may04.htm
Charles Savoie wrote a very compelling argument for getting involved in politics: to protect our property rights, specifically, the property rights of silver investors. He has convinced me that this is important. Therefore, I've decided to help. So, I'm asking for help from you, my readers.
HELP WANTED: Someone with experience who can run a Political Action Committee to advocate the use of gold and silver as money. If we start such an organization now, it will likely be a very big thing with gold and silver investors who will soon be growing increasingly rich and who will need a political voice. Help me with this project, and I'll help by providing exposure, guidance, and objectives. I need someone with the legal experience to help make this possible, and form the legal organization. Also wanted are people with good public speaking skills, good writing skills, and advertising experience. Email me at jasonhommel@yahoo.com
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Considering the topic of political action...
The sponsors of the Sound Money Bill in New Hampshire are now looking for donations so they can take this to other states!
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.
Now looking to raise $10,000 to $15,000 for "phase II" with $1300 of expenses left over from phase I.
Phase III will be to take it to other states!
Send any donations you can, to:
[These are not political campaign donations.]
SOUND MONEY FOR AMERICA,
c/o Henry W. McElroy,
15 Iroquois Rd, Nashua, NH 03063
ANY AMOUNT, ANY LEGAL TENDER CURRENCY - U.S. OR FOREIGN !
Video copies of the sound money bill press conference are available for a $35 donation.
For more info, contact
Rep. Henry W. McElroy, NH State Representative
Sponsor of the bill
603-233-5892
Harvey Wharfield
978-635-9586
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Because I have a market reach, I also receive a lot of tips about silver stocks. And thus, I believe 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: $39.95/monthly, or $49.95 for a single month, or $295.00/year
To order: Click here
If you have any questions about billing or order fulfillment, you need to contact my support staff at support@goldismoney.com and not me. I manage a large portfolio, and I don't have time to process billing requests. I don't bill any cards, my support staff handles all of that. The toll free telephone customer support line is: 877-895-6824.
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General Commentary on Silver (slightly modified from last week):
See my article: Biblical Guidelines for Managing your Money
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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WHERE and HOW to BUY SILVER BULLION
http://www.goldismoney.com/buy-gold.php
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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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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 nor investment 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
$26,400,000,000,000: World stock market, June 2002: http://www.nyse.com/press/1044027443845.html$20,200,000,000,000: U.S. bond market, yr end, '02: http://tinyurl.com/vr7g $11,300,000,000,000: NYSE U.S. stock market, April, '04 (363 bill/s x $31.14/s ave.) http://nyse.com (See: Market info: quick facts) $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 $2,360,000,000,000: U.S. annual budget 2004 $2,572,160,000,000: Marcos/Phillipine "black/unofficial" gold: 200,000 (to 500,000) Tonnes @ $400/oz. (Book: "Gold Warriors") $1,860,000,000,000: World "official" gold, 145,000 T @ $400/oz. http://tinyurl.com/vrcc $700,000,000,000: U.S. budget deficit (current). $554 billion ending fiscal year, 09/30/'03 http://tinyurl.com/bbp $272,000,000,000: Market Cap of Microsoft (03-2004) http://tinyurl.com/vrcn $180,000,000,000: Debt of Ford Motor Co. (03-2004) 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?) $75,000,000,000: Money flowed into Equity funds in the first quarter, 2004 $7,090,000,000: all the world's silver stocks (59 of them on this list, as of Dec. 5th, 2003) (Perhaps $10 billion by April?) $1,225,000,000: 49 mil oz. of registered COMEX silver @ $ 25.00/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 68 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 68 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 68 x 10, You will see that bonds and currency are overvalued relative to select silver stocks by a factor of 139,000 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 139,000 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 55% 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: "68 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 68 times better. Currently, the ratio is 68 ounces of silver can buy one ounce of gold or 68:1.
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.php
For a list of Brokers that handle Canadian issues and/or pink sheets:
http://www.bibleprophesy.org/SilverStockExtra.html
To track the 163 ticker symbols of the 100+ stocks on this list at yahoo: (Updated on April 2)
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). 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.
KGHM Polska Miedz
--KGHM is the world`s sixth-largest copper producer and second or third in silver.
--Copper/Silver mine in Poland.
--Market capitalisation is about $1.52 billion.
Compania de Minas Buenaventura SA (BVN)
http://www.buenaventura.com/
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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ABX (Barrick)
http://www.barrick.com/
535 million shares
@ $18.38/share
$9,833 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."
$9,833 million Market Cap / 1710 mil oz. = $5.75/oz. silver
You get "approx" 1.03 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.
About a year ago, perhaps spring 2003, ABX made an announcement about covering 30 million ounces of silver they sold short. Then, a large buyer showed up in the futures contracts for about that amount. I do not know whether, or how, that has yet been resolved.
I expect silver bullion to continue to outperform ABX stock at these prices.
IPOAF.PK (INDUSTL PENOLES)
http://www.penoles.com.mx
397.5 mil shares outstanding (2002 annual, unchanged since 2001)
@ $3.75/share
$1490 mil MC
419 proven and probable reserves of silver (from 2002 annual report on website)
$1490 mil MC / 419 oz. silver = $3.56/oz.
You get "approx" 1.56 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. 2004 from ECU Mini, who reported to lemetropolecafe.com, is that Penoles has hedged several year's worth of silver, that is, they have locked in to sell mostly all their silver at low 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.
Given the report in March, 2004, that Penoles has hedged silver for two years, I expect silver bullion to continue to outperform IPOAF.PK stock at these prices.
CDE (COEUR D'ALENE)
http://www.coeur.com
coeurir@coeur.com (208) 769-8155 or (800) 624-2824
213 mil shares (Issued 32 mil new shares late Oct. 2003)
@ $4.13/share
$880 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)
$880 mil MC / 225 mil oz = $3.91/oz.
You get "approx" 1.42 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 expect silver bullion to continue to outperform CDE stock at these prices.
SIL (APEX SILVER)
http://www.apexsilver.com/
information@apexsilver.com (303) 839-5060
45,023,760 ordinary shares outstanding. (Jan 30th press release)
@ $15.30/share
$688 mil MC
cash on hand: $350 million after Jan 30th share offering, and March 16th convertable debenture.
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
$688 mil MC / 454 mil oz = $1.52/oz.
You get "approx" 3.66 ounces in the ground for 1 oz. silver's worth of stock.
Additional comments: A reader emailed me saying that Apex has 35 exploration properties. I have not yet confirmed this report.
March 16th, Apex raises $144 million in a convertable debenture deal to help finance the development of San Cristobal. They now have 350/435, or 80.4% of the capital costs needed for construction. Raising the last bit should now be very easy to do. If, while raising money, they held their cash in the form of silver bullion, they would probably not need to raise any more cash at this point, since silver has moved up over 50%.
Apex is now the most cash rich silver stock on the list. About $350 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 in significant size for sale available anywhere.
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 hit a recent high of $.51/lb., from a low of about $.35/lb., currently at $.47. 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: Canadian Zinc, Expatriate, or Metalline (I own Metalline, but not SIL.)
I do not have an idea on whether or not SIL will out perform silver bullion or not. It's hard to say, because of that huge zinc bonus. I expect most of the other stocks on this list to outperform or significantly outperform silver bullion in the long run from today's prices.
GRS GAM.TO (GAMMON LAKE)
http://www.gammonlake.com/
gammonl@sprint.ca (902) 468-0614
62 mil shares Fully Diluted: (Feb 27th, 2004)
@ $5.78/share
$358 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.
$358 mil MC / 231 mil oz.= $1.55/oz.
You get "approx" 3.58 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.
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)
@ $1.31/share US
$59 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"
$59 mil MC / 42 mil oz. = $1.40/oz.
$59 mil MC / 1000 mil oz. = $.058/oz.
You get "approx" 3.97 ounces in the ground for 1 oz. silver.
Exploration Potential: 94
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. One man suggested buying both Clifton and Dumont to ease the difficulty in trying to figure out their JV agreement.
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
ABL signs a contract with GNC. (April) Clifton's biofirm's colloidal silver product will be on the shelves of this mass market health food and fitness stores, GNC. Congradulations to Clifton!
FSR.TO FSLVF.PK (FIRST SILVER)
http://www.firstsilver.com/
info@firstsilver.com (604) 602-9973 or (888) 377-6676
38.6 mil shares fully diluted (Jan 2004)
@ $1.70/share Cdn x .72 US/Cdn = $1.22 US
$47 mil MC
From the Company's main page at their url:
"As at December 31, 2001, First Silver's mineable reserves were 12 million ounces of silver and inferred resources totaled 30 million ounces of silver. The mine is developing a 1000 plus meter exploration drift to upgrade currently identified inferred resources to mineable ore reserves and to discover new reserves."
12 + 30 = 42 mil oz.
$47 mil MC / 42 mil oz. = $1.12/oz.
You get "approx" 4.94 ounces in the ground for 1 oz. silver's worth of stock.
Additional comments: This is a high grade, producing miner. The high grades, about 300g/ton, are a plus. They are also actively exploring, another plus.
3rd quarter, 2003, FSR.TO produced 389,154 oz. silver, and 604 oz. gold. and revenue was $2.09 million for the 3rd quarter. They produced at a loss, (a penny per share). They are unhedged, and remain committed to remaining unhedged.
PAAS (PAN AMERICAN SILVER)
http://panamericansilver.com/
info@panamericansilver.com (604) 684 -1175
70 mil shares fully diluted (April, 2004)
http://panamericansilver.com/s/CorporateInformation.asp?ReportID=26039
@ $11.73/share
$821 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
$821 mil MC / 743 mil oz. = $1.10/oz.
You get "approx" 5.03 ounces in the ground for 1 oz. silver's worth of stock.
Additional Comments: 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 CDE).
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
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