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-- Posted 22 May, 2004 | Digg This Article
FRIDAY, May 21st, 2004
This week's report lists 114 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 54 explorers. There are about 30 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.
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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 $5.84/oz. as of Friday, 5:30 PM West Coast US, which was used to calculate the following figures. The CAN $ / US $ conversion factor is .7281. I will use .73 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) 0.94 up --infamous hedger (18 mil oz. gold hedged, 3 yrs production) hedged?
- CDE (COEUR D'ALENE) 1.3 up --current producer, (gold bonus) in debt.
- IPOAF.PK (INDUSTL PENOLES) 1.8 down --current producer, mostly family owned, hedged?
- SIL (APEX SILVER) 3.4 up --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
- FSR.TO FSLVF.PK (FIRST SILVER) 4.4 up --current producer, (not profitable '03 3rd q.) unhedged
- PAAS (PAN AMERICAN SILVER) 4.9 up --current producer, in debt.
- MFN MFL.TO (MINEFINDERS) 5.0 up --significant gold bonus, $35 mil cash on hand.
- KBR.V KBRRF.PK (KIMBER RSCS) 5.3 up One property, high grades, with exploration potential.
- CFTN.PK (CLIFTON MINING) 5.5 down -- (130 EXPT) (colloidal silver patent bonus)
- MGR.V MGRSF.PK (MEXGOLD RSCS) 6.5## even (##exploration target) -- bonanza grade discovery on Jan 13th
- WTZ WTC.TO (WESTERN SILVER) 5.5 up -- (23 EXPT) large mine development cost. copper & zinc bonus
- * TM.V TUMIF.OB (TUMI RSCS) 6.9 up -- (14 EXPT) recent bonanza grade silver discovery
- SSRI SSO.V (SILVER STD RSC) 8.0 up --multi-property company, understands silver story
- CZN.TO CZICF.PK (CDN ZINC) 8.7 way up --large zinc bonus, high grades, low start up costs, great EXPT
- ORM.V OREXF.PK (OREMEX RES) 8.8 up (37 EXPT)
- SRLM.PK (STERLING MINING) 12.2 down --(29 EXPT) acquired the Sunshine in Cour d'Alene
- CHD.V CHDSF.PK (CHARIOT RSCS) 14.7 down (explorer, with inferred resources)
- GGC.V GGCRF.PK (GENCO RESOURCES) 14.5 down
- RDV.TO RDFVF.PK (REDCORP VENTURE) 16.2 down --60% gold bonus
- FAN.TO FRLLF.PK (FARALLON RSCS) 16.9 up --(29 EXPT) low grades, silver 1/3; also gold & zinc bonus.
- ADB.V ADBRF.PK (ADMIRAL BAY RSCS) 19.9 down --actively expanding resources. (Huge gas bonus)
- * PLE.V (PLEXMAR RES INC) 22 down
- HDA.V (HUSIF?) (HULDRA SILVER) 23.2 up --very tiny, zinc bonus, low start up costs.
- ASM.V ASGMF.PK (AVINO SILV GOLD) 27.8 up --owns 49% of the Avino +4 other silver props. (silver bonus)
- EXR.V EXPTF.PK (EXPATRIATE RECS) 27.9 up --significant zinc bonus 60% zinc, 25% silver
- * MGN (MINES MGMT) 28.6 down --60% copper bonus (low grades), start up cost ~ $250 mil
- * SVL.V STVZF.PK (SILVRCRST MINES) 29.2 up --(49++ EXPT) --(Silver in Honduras) ++
- ABI.V ABMBF.PK (ABCOURT MINES) 40.3 down --large zinc & small gold bonus
- UNCN.OB (UNICO INC) 58 up --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) 44-74 "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) 29-146 "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)
- PXI.V PNXPF.PK (Planet Exploration Inc.)
- * CBE.V CBEFF.PK (CABO MINING) --Historic Silver and Cobalt district
- 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) 194 "exploration potential"
- * KG.V KDKGF.PK (KLONDIKE GOLD)
- SML.V SMLZF.PK (STEALTH MNRLS)
- NBG.V NBULF.PK (NEW BULLET GP) 54 - 150 "exploration potential"
- SDR.V SDURF.PK (STROUD RSCS)
- ATN.TO ATNAF.PK (ATNA RES. LTD) partners with Expatriate Res.
- 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)
- MTB.V (Mountain Boy Minerals Ltd)
- LSM.V LASCF.PK (Langis Silver & Cobalt Mining Co Ltd)
- 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):
The silver bull is definitely back! As I produced this report this Friday evening, I see that most of the silver stocks are up significantly from last week. Many are up by 20% or more, all in one week. This week was definitely a turning point for the entire silver stock sector.
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There are two excellent annual silver surveys for 2003 that are sponsored by industry.
The survey by silverinstitute.org costs $195, 87 pages.
http://www.silverinstitute.org/wssum03.pdf -- 8 page free summary of last year's report.
The survey by cpmgroup.com costs $150, 162 pages.
http://www.cpmgroup.com/SSpress2004.pdf --3 page press release.
It is alleged that these reports are inaccurate and biased. People have complained or alleged that the reports are either produced by the miners, and thus overly bullish, or produced by the users, and thus, overly bearish.
Although the information within the reports do slightly differ from each other, I would guess the reports are reasonably accurate. Or, at least, reasonably accurate enough to know that you are doing very well by buying silver now.
The two reports present the case that about 500 million oz. of silver are mined each year, about 200 million oz. of silver comes from scrap, and about 100 million oz. of silver comes from investor dis-hoarding, either by individuals or government sources, in order to meet the annual demand of about 800 million oz. of silver by industry & jewelry. This is wildly bullish, because investors are net selling more than buying, and I think the potential of investor demand is huge, and can be measured by seeing how much paper money there is in the world.
The main problem, I think, is that these industry reports are not widely advertised. I believe the general public is generally unaware of the silver supply and demand story as contained in these reports. The wildly bullish case for silver may be known relatively well (or not) within the silver investing community, but not by the man on the street who is still in the process of inheriting "free" silver, and selling it for the quick cash when he can.
As I see it, the second biggest problem with the reports is that they are biased. They overlook the monetary aspect of silver. They focus on current supply and current demand for silver. While that is certainly useful, they neglect to emphasize the potential monetary demand for silver, that does not exist at the moment. Potentially, all the paper money that exists could demand silver and gold above all else, because gold and silver are money, and paper dollars are fraud. The reports neglect this point, or dismiss it as somehow not valid. The point is even dismissed as if this was a "religious" concept.
Thus, when it comes to try to predict the future demand for silver, the industry reports focus all their energies on whether there will be increased demand for silver by photography, or by jewelry, or as a biocide, or as used in high temperature super conducting wires. And the reports completely neglect to focus on what may happen to silver demand with rising interest rates, or if faith in the multi trillion dollar bond markets collapse, and people demand real money that goes up in value instead of going down!
This free weekly silver stock report does contain the key bullish points as contained in these two reports. But I also focus on how much money is out there in the form of dollars, bonds, and in the banks! Because, in the future, that will determine the potential of monetary demand for silver, which will, in the long run, determine its value.
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Speaking of silver's potential value, how will it actually be valued if the whole world returns to using gold and silver as I expect? Sure, it may go up a lot in terms of dollars, but won't everything else just cost that much more, too? No. No! I expect silver's rise in value to far outpace every other asset, and every other commodity you can buy.
As proof, let's look at the historic value for silver. And given the ongoing supply/demand deficit, and shortage, as reported by the two industry reports above, I expect silver's value to far exceed the historic value.
There are several ways to evaluate silver's historic value. The first is to look at what silver could buy, and to look at what wages were in terms of silver.
I have written that a day's wage, in silver, for skilled labor, about 100 years ago, ranged from being a silver dime as one man reported, a silver quarter during the great depression in the 1930's, or as much as a silver dollar. Henry Ford paid his workers, what was considered a very excessive $5.00 a day. In silver, at .72 oz. per silver dollar, that was 3.6 oz. of silver per day. But remember, that was an extremely high and very unusual wage. It was made possible by the very high productivity of the assembly line, and little government regulations or taxes. If silver returns to historic norms, it will be an ounce of silver, or less, for a day's wage. Due to scarcity of silver, it may well be more like less than a 1/10th of an ounce of silver per day. Or perhaps, a silver dime for two weeks of labor!
The reason is that the U.S. has well over 100 million workers, yet the world has about 250 million oz. of silver in known inventories! If 1/10th of an ounce of silver is a day's wage of $100, then an ounce of silver would be $1000/oz.
The other historic value was the gold to silver ratio. One ounce of gold was the same value as about 10 to 15 ounces of silver. Again, due to silver's scarcity today, that ratio will certainly deserve to be exceeded, to at least 5 ounces of silver to one ounce of gold. Thus, silver will be valued at about 1/5th of $400, or $80, assuming that gold is fairly valued at $400. But, if gold should really be valued at about $5,000 per ounce, then silver will be about $1000/oz.
In both of these examples, this does not mean the price of a gallon of milk would shoot up to $400 per gallon. I would expect that milk prices would remain the same, at $4.00 per gallon.
If milk rises to $40/gallon, and if consumer prices rise by a factor of ten, then increase the "future value" price for silver also by a factor of ten, so that silver would be $10,000/oz, and 1/10th of an ounce of silver would be $1000, so that a 1/10 of an ounce of silver would be able to buy the things you'd buy today with a day's wage.
And if you truly believe that an economy would be run more efficiently, as I do, without all the fraud of the dollar negatively affecting things, then you should assume, as I do, that a day's wage of silver (however small of an amount that would be) should help the average consumer to be able to buy more than a day's wage of fiat money can buy today.
Further proof: Monetary demand during inflation will go into all tangible things, yes. However, nobody can buy and store a billion dollars worth of "milk". Milk spoils. It's simply too inconvenient to use as money. And so are nearly all other goods. Silver does not spoil, and people will realize that no other commodity has the peculiarly unique properties that the precious metals have, that make them the only tangible things that qualify as money.
This combination of factors then, forms my view of silver as an investment. I expect the future value of silver to be at least $1000 per ounce, in terms of today's money and today's value and today's purchasing power. Let me rephrase so everyone is clear. I believe that an ounce of silver will buy what $1000 of today's money will buy. Today, with $1000, I can buy a month's rent. Yes, a month's rent may cost an ounce of silver in the future. Today, with $10,000, I can buy a nice used car a few years old. Yes, I expect to be able to buy a similar car, or better, with about 10 ounces of silver, in the future.
I expect that most readers will either not understand, or not believe, my point of view. That's fine. But ask yourself: Could it really be any other way? There is going to come a time when the silver price moves up so sharply, so violently, it will be something which the world has never, ever seen. There is no experience that any human has experienced that can prepare anyone for what is coming. This will happen because the world has never totally abandoned using silver as money, until this generation. The world has never seen such a low price for silver as today, and the world has never seen such low inventory levels for silver as today, and the world has never seen such a high industrial demand for silver as today. The world has never seen such a deficit and scarcity of real money. And the world has never seen such a huge build up of false wealth, as represented by the enormous amounts of paper money that exist in the form of bonds and M3.
Therefore, I'm not scared, troubled, or concerned after having seen silver move from $8.40/oz. to $5.50/oz. Today's price movements in silver are but tiny wiggles, and are insignificant in the long run, in the grand scheme of things. Silver will remain a screaming good buy even at $50 to $100 per ounce. And at that price, there will be billionaires lining up and begging to get it, because there will be little else for them to buy to protect their bonds and money from going up in smoke as inflation wipes out the paper fraud and dollar debts accumulated by generations.
Today is not a "once-in-a-lifetime" opportunity in silver. It's not a "once-in-100 years" event. It is an event that has never before occurred in all of human history. When in human history has anyone had the opportunity to earn $100 as a day's wage, and be able to buy nearly 17 ounces of silver with that? When in human history has anyone has the opportunity to do this while silver was as scarce as it is today?
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Reports of a shortage of silver:
Dear Sir,
I have some information that You will probably find interesting. I live
in Poland and I am a silver investor. Recently I have been gathering
information about purchasing silver in Poland. The only company that
sells silver bars here is KGHM - in 2002 this was world's 3rd producer (after
Industrias Penoles and BHP Billiton). Until a month ago they have had
silver available for sale for everyone - I mean that the minimum order
size was 1000 oz bar (they produce 1000 oz bars) and there was silver
available to purchase. Now I've got a letter from KGHM in which they said
that the minimum amount of silver per purchase is ten 1000 oz bars and
that there are no silver bars available at the moment. Since investing in
silver (and in other precious metals) is not popular here (because of the
22% VAT on it) and that I doubt that local silver users bought more than
usually, I think that silver could have been exported to meet the
delivery demand in the USA/COMEX. So, Poland - a large producer of silver has no
silver available right now.
--KGHM is the world`s sixth-largest copper producer and second or third in silver. Their market cap is about $1.5 Billion.
This is exactly the kind of report I have been predicting! Given that there is a current deficit between mine supply, and industrial demand, and given that there is no significant investor demand (and in fact, there is still ongoing investor dishoarding), the price of silver will have to move way up if there is any significant investor demand! Sure enough, you can't buy silver from several of the large miners anymore, because all of their production is pre-sold, meaning they have hedged their production at low price levels!
This report about KGHM is nearly identical to the report about Penoles in Mexico, which is the world's top producer of refined silver. Here is the excerpt from the profile below about Penoles:
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."
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Correction from last week:
Just wanted to correct something you said in your report this week. You said that you have to put up over $7k just to control one contract. That is not true. The margins were raised recently up to $3375 for initial margin, which is the Reg T (50% initial margin for equities) and then maintenance margin of $2.5k per contract. So, actually, one only needs $3375 and to maintain at least $2500 in the account per contract after the initial buy. This as of the 5.71 close represents a down payment of 11.8% with a near 9:1 built in leverage.
This is not to advocate using the leverage but to correct an error that was made in your report. For gold the figures are 2025 initial with 1500 maintenance for a near 20:1 built in leverage feature. This is more in line with what silver was before its price move and margin change. I suspect at some point in the future if silver doesn't move very far they will reduce margins again and the implied leverage will climb back towards the historical 18-20:1 range.
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Another question/concern about possible confiscation and government action;
Dear Jason,
I enjoy your weekly commentary, etc. You mentioned in your real estate section that the government can tax property owners whatever, whenever. You're right. They can also make holding silver and/or gold coins illegal. Coin shops will be shut down, PM mines will be guarded by National Guard, banks will be closely monitored, boarders will be closed, you have explained this scenario before. This idea is only far fetched for people who cannot conceive of their country going in this direction. So my question is, "When our $ currency becomes useless, as well as worthless, and the government makes it illegal to possess coins (even for collectors), how are we ever going to cash in coins (which will be the only currency of value) so we can pay monthly expenses?" Owning coins will be equivalent to owning illegal drugs in this country. I don't even want to discuss a black market that would form here. But I am interested in your answer. I would appreciate anonymity, but do share your advice with all your subscribers if you think it will be useful. Paraphrase the question as you see fit.
Yes, and government can, in theory, also round up all "political dissidents," such as people who believe in the Bible, precious metals, and gun ownership, herd them into camps and stave them to death. But it does not mean that they will, or can, do so in the U.S.A., even though, in fact, governments across the world have done exactly that to Christians time and time again. You know what? This nation, the U.S.A. was founded by Christians who escaped such persecutions, and I believe there exists within our society, enough of a remnant of those people who would fight back any such attempts to do that here in the U.S.A. You can either let yourself become a coward regarding their plans for gun owners and you can sell your guns, or you can go out and buy guns in order to further protect yourself against any such tyranny. You can either cowardly sell your silver, or you can go out and buy more. It comes down to this: Do you believe in truth, and are you willing to fight for it if necessary, or would you rather be stolen from, and do nothing?
Who says that we should even tolerate government rule changes that may say silver is illegal to own? There are other options if they make silver illegal to own. You can fight back! You can work for a living, instead of live off savings, and wait for the corrupt government to topple. You can promote the use of silver as money, and earn money in the process, by being a silver bullion dealer. Start selling bullion to your friends and family. You can hire people to fight back, such as political representatives, and even pay them in silver!
The key difference between taxing land, and taxing gold and silver is that land is easily found. It does not go anywhere. Gold and silver, on the other hand, are easily hidden, and not easily found. That is why gold and silver are money, and land is not, even though both can be owned as private property. You cannot transport land! If they make gold and silver illegal, it would serve to make them scarce, and worth more.
The bigger worry, should your scenario come true, if the currency is worthless, and if silver and gold are illegal, what will people use to conduct any trade at all? If history is any guide, and it is a reliable guide, then after the fraudulent currency becomes worthless, then the corrupt government will have collapsed, and they will be unable to enforce any unjust law that says real money is illegal. How will they pay their own policemen to enforce such a law if paper money is worthless? Thus, after the government collapses, people will spontaneously use silver and gold as money.
The big worry is not that "they may take your silver, sometime in the future, maybe, if they can find it".
The real worry is that "right now, they are taking your dollars, as they inflate!"
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Recently, there has been a great success in getting silver investors to take actions to help the silver price. These grass roots efforts among silver investors have been started by Russell Townsend of http://www.goldismoney.info, and have been greatly aided by Ted Butler of http://www.butlerresearch.com and Bill Murphy of http://www.lemetropolecafe.com.
Over 3500 people have signed the silver petition to stop the manipulation at the COMEX:
http://www.PetitionOnline.com/comex/
And over 500 people have written letters to the CFTC regarding silver prices, which caused them to respond with a 9 page report:
The CFTC report on the allegations of manipulation in the silver market got some press this week:
I commented on the CFTC report last week, pointing out what I felt was their most absurd statement, that wealthy silver investors could buy up silver if it was too cheap. This is ridiculous in my opinion, because there is a position limit restriction of 1500 contracts per delivery period, which is a limit of 7.5 million oz. of silver, or about $45 million dollars. Thus, it would take a billionaire 4 years now to buy a billion dollars of silver at current prices.
Here is a newspaper article overseas that highlighted the CFTC response:
No silver prices manipulation: CFTC
Commission refutes allegations by investors
http://business-times.asia1.com.sg/story/0,4567,116895,00.html
Ted Butler also has comments this week on the CFTC response:
http://www.investmentrarities.com/05-17-04.html
This letter writing campaign has been encouraging. Silver investors are motivated to act! That's wonderful news! But I think we were writing to the wrong people. We were writing to the CFTC head. At least, they have now been put on notice. Now, I think it's time to take the message about silver to the people.
As I have indicated above, I do not think the general public is educated about silver. I do not think they know what is contained in the industry reports by the silverinstitute and the cpmgroup, nor do they know how much paper money has been printed, because the papers rarely mention it. It's time we told them. I have continually called for all my readers to tell their friends and family about goldismoney.com.
Now, I think it's time that the silver community started a letter writing campaign to the editors of newspapers around the world, to tell them about silver. I have been wanting to do this myself, for a while, but I loathed starting the research process to find and locate the email addresses of all the major newspapers across the U.S. In fact, I was thinking of hiring someone to research on the internet to find them all, because I just do not have much time these days. But, behold! The wonder of google.com helped me to find someone who has already done the hard work for me! Look at the following three urls!
http://www.awolbush.com/papers.html
http://www.results.org/website/article.asp?id=428
http://www.waronfreedom.org/activists/emleted.html
The first two urls above have lists of emails, but the third one is awesome because the emails are all in one neat list, so I have copied it to my site, too.
http://www.goldismoney.com/editorsemails.html
That url lists the email addresses for about 200 world newspapers, and about 100 U.S. newspapers, so you can email them all at once. You have to copy the list, and paste it into your email, and there are direct instructions on tips for submission of letters to the editor. Most editors, most papers, want letters of 250 words or less. So the task is easy. But if 500 people write letters on the silver market to about 300 newspapers around the world, I believe wonderful things will happen.
Here is a sample letter:
May 21, 2004
Dear Editor,
I'm a silver investor. I believe paper money is fraudulent. There is over 30 trillion dollars, U.S., worth of bonds in the world, but less than 2 trillion dollars worth of gold, according to gold.org.
As of April, 2004, the size of M3, the money in U.S. banks, has reached 9.1 trillion dollars, yet due to fractional reserve banking, the total of U.S. currency and coin in circulation is only 724 billion dollars as reported by treas.gov.
At silverinstitute.org and cpmgroup.com, they each report that silver has been in a deficit for about 15 years, where world mine supply has been about 500 million ounces, scrap supply about 200 million ounces, and industrial and jewelry demand about 800 million ounces. The difference, about 100 million ounces, has come from investor and government selling, drawing down reserves of silver. Known supplies of refined silver are down to about 250 to 600 million ounces. At the COMEX, they are down to 48 million ounces of silver left that is registered for delivery, which you can see at nymex.com.
The governments of the world are printing up too much paper money, and the world is running out of real money, silver. I believe this will lead to the price of silver rising dramatically in value, around the world.
I urge your readers to verify the statistics I have provided, and to make their own decisions.
Sincerely,
Jason Hommel
Grass Valley, USA
Goldismoney.com
(530) 274 3450
When I sent out my letter above to that list, I received about 70 "undeliverable/delivery has failed" messages. I sent it BCC, or "blind carbon copy", which means it may be interpreted as spam. It may have had more of an impact if I sent out my letter to each address individually, but I just didn't have the time to do that this week. Maybe next month.
I also did not include my full address, which some editors require. But I'd rather keep a bit of privacy in that regard.
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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". 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: http://www.goldismoney.com/available-reports.html
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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I will be attending the following two mining/gold shows in the next month:
1. World's Largest Natural Resource Investment Conference...
June 02-03, 2004 - New York Marriott Marquis
http://www.iiconf.com/ny04/default.aspx
2. World Gold, PGM & Diamond Investment Conference,
June 13-14, 2004 - Vancouver, BC
http://www.goldshow.ca/
I will be speaking in Vancouver.
In case you can attend one of the shows, and if you want to know what I look like, there's a picture of me here:
http://www.goldismoney.com/about.php
General Commentary on Silver (slightly modified from last week):
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/ -- site temporarily disabled.
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 $25,000 to $35,000 for "phase II", to get set up with an office and staff training..
Looking to raise $500,000 for "phase III", to take this to about 5 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
We also need assistance with the following.
1. Please contact your local representative to your state government. Find out whether they might support a similar "sound money bill" in your own state.
To contact your state rep to the federal goverment, see http://www.house.gov/writerep/
To contact your state rep to your local state government, you will have to find that on your own. Try searching for "contact state representative california" and replace the name of your state in the search.
2. If you know of any local representaives to your state government, who may be GOOD, LIKE MINDED REPRESENTATIVES, SENATORS, and GOVERNORS, who may like to support, or sponsor, a sound money bill in your state, please tell them about the NH initative. Copy the above, and send it along to them. And call Henry W. McElroy or Harvey Wharfield, and let them know of the other reps who may assist the cause.
3. If you have an email list to people who may be interested in gold and silver as money, or who may be good conservatives, please send out this notice to the list, so the project can move forward!
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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
GoldIsMoney.com
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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
Over 3400 people have signed 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 $11,447,800,000,000: U.S. GDP, 2004 q1 http://www.bea.doc.gov/bea/dn/home/gdp.htm$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) $9,101,000,000,000: M3 (money in U.S. banks) April, '04 http://tinyurl.com/vra0 $7,183,392,668,476: US debt, 5-18-04 http://www.publicdebt.treas.gov/opd/opdpenny.htm $2,360,000,000,000: U.S. annual budget 2005 http://tinyurl.com/3xbd2 $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 $724,174,342,365: Total U.S. paper currency & coin in circulation, Dec. 31, '03 http://www.fms.treas.gov/bulletin/index.html $700,000,000,000: U.S. budget deficit (current). $272,000,000,000: Market Cap of Microsoft (03-2004) http://tinyurl.com/vrcn $222,000,000,000: M3 increase (money in U.S. banks) from Jan 2004 to April 2004 (in three months). $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?) $6,710,000,000: 671 mil oz. of "identifiable" silver bullion in the entire world, according to GFMS @ $10/oz. $480,000,000: 48 mil oz. of "registered" COMEX silver bullion @ $10/oz. http://tinyurl.com/vrcw
So, what do all those stastistics mean?
From Jan, 2004 to April 2004, over those three months, the increase in M3 ($222 billion) (the money in the U.S. banking system) is over twice as much as the value of the official U.S. gold hoard. ($104 billion at $400/oz.)
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 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:
GoldIsMoney.com
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 have made mistakes in the data from time to time. 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 10 mil oz 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
@ $19.88/share
$10,635 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."
$10,635 million Market Cap / 1710 mil oz. = $6.22/oz. silver
You get "approx" .94 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.
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)
@ $4.65/share
$990 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)
$990 mil MC / 225 mil oz = $4.40/oz.
You get "approx" 1.33 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.
IPOAF.PK (INDUSTL PENOLES)
http://www.penoles.com.mx
397.5 mil shares outstanding (2002 annual, unchanged since 2001)
@ $3.50/share
$1391 mil MC
419 proven and probable reserves of silver (from 2002 annual report on website)
$1391 mil MC / 419 oz. silver = $3.32/oz.
You get "approx" 1.76 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.
SIL (APEX SILVER)
http://www.apexsilver.com/
information@apexsilver.com (303) 839-5060
45,023,760 ordinary shares outstanding. (Jan 30th press release)
@ $17.53/share
$789 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
$789 mil MC / 454 mil oz = $1.74/oz.
You get "approx" 3.36 ounces in the ground for 1 oz. silver's worth of stock.
Additional comments: Apex may also have up to 35-50 exploration properties.
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)
@ $5.99/share
$371 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.
$371 mil MC / 231 mil oz.= $1.61/oz.
You get "approx" 3.63 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.
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)
@ $1.97/share Cdn x .73 US/Cdn = $1.44 US
$56 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.
$56 mil MC / 42 mil oz. = $1.32/oz.
You get "approx" 4.42 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
@ $12.62/share
$883 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
$883 mil MC / 743 mil oz. = $1.19/oz.
You get "approx" 4.91 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 extent required as a condition of prudent mine financing."
My opinion is that it is NEVER prudent to go into debt, or lock in silver prices to finance a mine. If PAAS cannot raise capital on the markets by issuing shares, then they should not be financing new mine construction. If the market will not support new mine construction, then the market does not need more silver. PAAS and CDE should learn to trust the free market process, and avoid debt.
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