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-- Posted 21 June, 2004 | Digg This Article
FRIDAY, June 18th, 2004
This week's report lists 111 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 30 additional "silver" stocks with incomplete information. Additions & Changes from last week are in bold.
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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 $5.97/oz. as of Friday, 5:50 PM West Coast US, which was used to calculate the following figures. The CAN $ / US $ conversion factor is .7336. 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")
Company names in bold have summaries below with updated information.
- ABX (BARRICK) 0.97 down --infamous hedger (16? mil oz. gold hedged, 3 yrs production)
- CDE (COEUR D'ALENE) 1.3 down --(also gold) in debt, produces at a loss.
- IPOAF.PK (INDUSTL PENOLES) 1.8 down --current producer, mostly family owned, hedged?
- GRS GAM.TO (GAMMON LAKE) 3.1 up --current producer, owns 26% of Mexgold
- SIL (APEX SILVER) 3.3 even --zinc bonus, low grades, cash rich--$345 million! in debt
- FSR.TO FSLVF.PK (FIRST SILVER) 4.8 up --current producer, (not profitable '03 3rd q.) unhedged
- PAAS (PAN AMERICAN SILVER) 5.0 down --current producer debt free
- MFN MFL.TO (MINEFINDERS) 5.2 down --significant gold bonus, $35 mil cash on hand.
- KBR.TO KBRRF.PK (KIMBER RSCS) 5.2 down One property, high grades, with exploration potential.
- WTZ WTC.TO (WESTERN SILVER) 6.0 up -- (21 EXPT) large mine development cost. copper & zinc bonus
- CFTN.PK (CLIFTON MINING) 6.1 down -- (145 EXPT) (colloidal silver patent bonus)
- SSRI SSO.V (SILVER STD RSC) 8.2 down --large company, understands silver story
- * TM.V TUMIF.OB (TUMI RSCS) 8.9 down -- (17 EXPT) recent bonanza grade silver discovery
- SHSH.PK (SHOSHONE SILVER) 9.4 NEW! near SRLM, CDE, HL.
- ORM.V OREXF.PK (OREMEX RES) 9.7 down (39 EXPT)
- CZN.TO CZICF.PK (CDN ZINC) 9.7 up --large zinc bonus, high grades, low start up costs, great EXPT
- SRLM.PK (STERLING MINING) 13.8 down --(33 EXPT) acquired the Sunshine in Cour d'Alene
- IMR.V IMXPF.OB (IMA EXPL) 14.3 down (57 EXPT) --Explorer in Argentina
- FAN.TO FRLLF.PK (FARALLON RSCS) 15.9 way up --(27 EXPT) low grades, silver 1/3; also gold & zinc bonus.
- CHD.V CHDSF.PK (CHARIOT RSCS) 15.6 down (explorer, with inferred resources)
- GGC.V GGCRF.PK (GENCO RESOURCES) 16.4 down --producer in Mex. Plans to expand and acquire
- RDV.TO RDFVF.PK (REDCORP VENTURE) 17.0 down --60% gold bonus
- ADB.V ADBRF.PK (ADMIRAL BAY RSCS) 22.2 down --actively expanding resources. (Huge gas bonus)
- * PLE.V (PLEXMAR RES INC) 24.7 down
- * MGN (MINES MGMT) 31.0 down --60% copper bonus (low grades), start up cost ~ $250 mil
- HDA.V (HUSIF?) (HULDRA SILVER) 31.1 down --very tiny, zinc bonus, low start up costs.
- * SVL.V STVZF.PK (SILVRCRST MINES) 33.8 way down --(56+ EXPT) --(Silver in Honduras) +
- EXR.V EXPTF.PK (EXPATRIATE RECS) 33.7 down --significant zinc bonus 60% zinc, 25% silver (got out Atna)
- ABI.V ABMBF.PK (ABCOURT MINES) 39.8 down --large zinc & small gold bonus
- * ASM.V ASGMF.PK (AVINO SILV GOLD) 43.4 down --will own 49%-100% of the Avino +4 other silver props.
- UNCN.OB (UNICO INC) 50 up --lease on largest property, needs $1 mil by Sept 1 2004.
* = I own shares
Explorers (by market cap, in millions):
- HL (HECLA MINING CO) .45 --A PRODUCER (gold bonus) cash rich.
- MGR.V MGRSF.PK (MEXGOLD RSCS) 7.3 -- bonanza grade discovery on Jan 13th, 2004
- SPM.V SMNPF.PK (SCORPIO MINING)
- CDU.V CUEAF.PK (CARDERO RSCS)
- AOT.V ASOLF.PK (ASCOT RSCS) -- owns percentage of Cardero, CDU.V
- * FCO.TO FCACF.PK (FORMATION CAPTL) Cobolt (and Sunshine silver refinery)
- * OTMN.PK (O.T. MINING) very large exploration potential
- * 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
- MCAJF.PK (MACMIN LTD)
- * FR.V FMJRF.PK (FIRST MAJESTIC) -- Bought a former silver producer. Acquiring silver properties.
- IAU.V ITDXF.PK (INTREPID MINRLS) 7 "exploration potential"
- * NPG.V NVPGF.PK (NEVADA PAC GOLD) 35-175 "exploration potential" (owns 1 silver property, 10 gold properties)
- MAI.V MNEAF.OB (MINERA ANDES) (gold bonus)
- MAG.V MSLRF.PK (MAG SILVER)
- ECU.V ECUXF.PK (ECU SILVER MINI) --50% gold bonus
- CAUCF.PK (CALEDON RES)
- * EDR.V EDRGF.PK (ENDEAVOUR GOLD) A PRODUCER (I could not yet find a listing of resources or reserves)
- PXI.V PNXPF.PK (Planet Exploration Inc.)
- QTA.V QURAF.PK (QUATERRA RES)
- BZA.V ABZGF.PK (AMER BONANZA)
- NJMC.OB (NEW JERSEY MIN)
- BCM.V BCEKF.PK (BEAR CRK MINING)
- * CBE.V CBEFF.PK (CABO MINING) --Historic Silver and Cobalt district
- DNI.V DMNKF.PK (DUMONT NICKEL) exploring Clifton's property
- EXN.V EXLLF.PK (EXCELLON RSCS)
- * KG.V KDKGF.PK (KLONDIKE GOLD)
- SML.V SMLZF.PK (STEALTH MNRLS)
- EPZ.V ESPZF.PK (ESPERANZA SILVR)
- APM.V (Amerix Precious Metals Corp) (NEW BULLET GP) 37 - 104 "exploration potential"
- SDR.V SDURF.PK (STROUD RSCS)
- * CMA.V CRMXF.OB (CREAM MINERALS) 217 "exploration potential" (low grades)
- CHMN.PK (CHESTER MINING)
- GNG.V GGTHF.PK (GOLDEN GOLIATH) --Historic silver district in Mexico
- GPR.V GPRLF.PK (GREAT PANTHER)
- * KRE.V KREKF.PK (KENRICH ESKAY)
- MMG.V MMEEF.PK (MCMILLAN GOLD)
- EGD.V EGDMF.PK (ENERGOLD MINING)
- LEG.V LEGCF.PK (LATEEGRA RSCS)
- * AUN.V AUNFF.PK (AURCANA CORP)
- TUO.V TEUTF.PK (TEUTON RES)
- PCM.V PAOCF.PK (PAC COMOX RES)
- BGS.V BLDGF.PK (BALLAD GLD SLVR)
- SRY.V (STINGRAY RSCS)
- 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):
I'm insanely bullish on silver.
I just returned from speaking in Vancouver on June 13-14, 2004 at the World Gold, PGM & Diamond Investment Conference. Since I gave several speeches on silver, I've become more bullish on silver. Why? Several reasons. Normally, I write once a week, which gives me time to think slower.
But in preparing for my speeches, I was forced to evaluate all the bullish reasons for silver together, all at once. And while speaking, I was forced to think faster.
After speaking, many people had questions on one specific area of the silver market, which I was usually able to answer, because I've been reading and writing about silver now for years.
In general, the people who came to me with questions were already bullish on silver, since they went to attend a mining show, and since they came to see me speak on silver. And yet, it seemed to me that they just wanted me to look them in the eye, and really say how bullish on silver I really was. They were looking for confirmation. In other words, they asked very general questions like "How high do you think silver will really go," and "How soon," and then they might ask, "Do you really think so?" even after I answered such questions. Each time, I had to re-think everything, and re-present everything, and re-summarize everything.
When writing, I don't like to repeat myself. When speaking, and answering people's questions, I was forced to repeat myself, over and over.
Furthermore, the feedback I received from people was instant. When speaking, I have the chance to see the facial expressions change as I present each bullish argument. However, when I write on the web, I present many arguments at once in a single essay, and so I don't necessarily know which arguments resonate the strongest with the readers, and convince them the most.
So, here are the two most bullish factors affecting silver.
1. The world has nearly run out of silver.
2. The nations of the world have printed up nearly unlimited amounts of unbacked paper money.
Put together, these two factors have never occurred before in the history of mankind.
True, the world was once using silver as money in many nations at once. But back then, in the late 1800's, the world had 5-10 billion ounces of silver to use as money. Today, we have much, much less, because most of the silver that has ever been mined in the world has been consumed by industry, and we may be down to about only one billion ounces or less.
True, there have been hyper-inflations as paper money has been printed to excess. But at those times, it was usually in one nation at a time, and there was still plenty of silver (and gold) to be used as money.
Today, no nation is using silver as money. And today, the world is almost out of silver. These factors create this once-in-history opportunity.
Silver today may be the best investment opportunity in the history of mankind.
One of the arguments that seemed to resonate the most with listeners was that at one time in history, a day's wage was a silver dime, or a silver quarter, or up to one or two silver dollars for miners, who were among the highest paid professionals in the world.
This fact alone presents the case: "A day's wage used to be a silver dime, or quarter." When I said that, faces lit up in recognition of the bullish case for silver. The reason why this argument is the best is that it shows how undervalued silver is, without putting a dollar amount on the change in value that will take place.
What's more, I can say with confidence that a day's wage will probably be less than a silver dime, since today, the world has consumed most of the world's silver. Thus, a silver dime may become a week's wage, or even a month, I don't know!
But let's value that in terms of dollars. Today, a day's wage is up to $100 to $200 for skilled labor, let's say $150. At $6/oz., that's 25 ounces of silver. A silver dime contains .0715 of an ounce of silver. 25 / .0715 = 350. I'm saying that if the world has a similar amount of silver as it did in the past, silver could rise by a factor of 350 times higher price than at $6/oz. However, since silver is more scarce today than in the past, and since we have many industrial uses that are consuming silver that we did not have in the late 1800's, then I'm way more bullish than that.
So, How High?
I'm saying I'm way more bullish on silver than saying it can go 350 x $6, or $2100/oz. I believe the price of silver will far exceed that due to the exhausted supplies, and the unrelenting massive industrial demand.
So, How Soon?
Given that the world is almost out of above ground refined silver, a permanant major price rise could happen at any time. The two silver surveys estimate there is about 200 million ounces to 600 million ounces of silver in known verifiable locations. At the COMEX, as of close of business: 06/18/2004, there are 45.8 mil oz. registered for delivery, and 71.9 million oz. Eligible. However, the silver in either category may be held by long term investors, who may be reading this very commentary, and who may not sell until much higher prices. Silver is coming to market, uneconomically, through three main sources: 1. As a byproduct of other mining, and 2. as people inherit silver and then sell it for the quick cash, and 3. as governments and bullion banks dump it. These supplies are meeting current demand. Literally, however, at $6/oz., a billion dollars cannot buy silver anymore. By the time a billionaire tried to buy silver bullion with a billion dollars, the price may be pushed up to about $40/oz. At $6/oz, a billion dollars is 167 million ounces. There is just not that much silver for sale at $6/oz. in the world today. If a billionaire was willing to pay any price to obtain "a billion dollars of silver", and if he found out that he could only obtain 25 million ounces, he might bid the price up to $40/oz.! Therefore, a major price rise can happen at any time one very wealthy person decides to buy.
The other reason I'm so much more bullish is that nobody presented any arguments to me that refuted what I was saying. If you go out in public, and say something ridiculous, you expect to be corrected rather quickly. But I wasn't. But two people raised some objections, which I will mention.
The first was "The dollar will never be destroyed, because the U.S. is too big." I will refute this argument by saying that the U.S. is not bigger than the world, just like the Titanic was not bigger than the ocean. The world is bigger. Furthermore, all frauds in the history of the world, and all fraudulent paper money in the history of mankind, all come to an end at some point.
Some investors said, "The dollar may collapse to zero, but not in my lifetime." This is a rather sad commentary on the state of mind of many older investors. They have no trouble investing in fraudulent dollars, thereby helping to support fraud. They may be approaching the end of their lives, but they have no thought of the eternal ramifications that their actions here on earth may have on their soul. If anything, the elder investors should be even more concerned that they are doing the right thing in God's eyes, not only for their own souls, but also for the benefit of those who will come after them. Unfortunately, it seems as if they are only out for the quick buck! The 70 and 80 year olds! Amazing!
Another investor said, "Perhaps people are not investing in silver, because they have heard this silver story for 15 years now, or longer." However, the silver story is changing significantly. There has been an ongoing deficit, and it has reduced above ground silver supplies at about the same rate as the size of the deficit. So, the silver story is changing. The warning is now more clear and urgent than ever before. So, if these investors who have heard the story have not yet moved into silver to protect themselves, they will have absolutely nobody but themselves to blame.
I would also like to address two other arguments that came up at the show.
The first was that India has plenty of silver that they may export, and may cap the silver price. Actually, India is a large importer of silver. Therefore, India is not capping the price, but supporting the price. There is no need to wonder whether India's supplies of silver may cap the price until they become sellers.
Second, it was pointed out that mining exploration is extremely risky. The point was made by several authors that only one in 1000 or one in 3000 exploration projects become mines. That may be true during the past 24 year bear market, but will not likely remain true if we have a bull market that drives the price up significantly. Today, there are virtually no silver mines operating at a profit, and most silver is produced as a byproduct of lead, zinc, copper, and gold mining. The fact that silver mining is an unprofitable business goes to show exactly why silver is too cheap!
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 silver researcher, Charles Savoie.
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Paper money fails when paper money is no longer able to buy the things that the holders of the paper money wish to buy. Today, that is happening more and more each day. Supply shortages are evidence of communism, which, it has been proven, does not work. We are seeing supply shortages in uranium, electricity, natural gas, oil, iron, steel, cement, copper, zinc, cobalt, nickel, selenium, and silver. (And I may have left out many other important commodities.) If you have a billion dollars, and you cannot buy a billion dollars of silver or basic commodities, your dollars are no good! Well, actually, a billionaire will always be able to buy a "billion dollars worth" of silver, but just not at today's prices!
Perhaps the reason that it has taken so long for paper money to fail in the U.S.A. is that the very wealthy people have nothing substantial to buy. The U.S. is already industrialized. We already have plenty of mansions, sky scrapers, highways, bridges, and those expensive things. However, in China, they are still industrializing. They are building everything at a rapid pace, and so, the raw materials for building all those things are finally running out.
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Inflation vs. deflation? Low interest rates vs. high interest rates?
I believe whether there is inflation or deflation, the price of gold and silver will go way up from here, and the reason is how much paper money they have created; excessively and fraudulently.
If there is inflation, of course, gold and silver will go up.
If there is deflation, it is usually the result of bankruptcies. If money is being destroyed due to bank failures, it would encourage other depositors to withdraw their money and to buy gold and silver, which do not default.
Richard Russell was recently bullish on silver, and then he backed off. He has written that if there is a deflation, that silver will not perform well, since silver is "demonitized" during a deflation. Richard Russell has said that the high levels of debt are like a short position on the dollar, and that it is dollars (not gold or silver) that will be in strong demand to pay off the debt. Thus, he concludes that people may even sell gold or silver to raise the dollars needed to pay off debt.
Let me refute Richard's argument. I believe that those who are in debt will be more likely to buy silver to pay off their debts! As an example, look at General Motors, (GM). GM has a market cap of $27 Billion dollars, and a P/E ratio of 10. Thus, they earn about $2.7 billion per year. GM has $28 billion in cash, and $297 billion of debt. Thus, it will take GM over 100 years to pay off their debt! If interest rates rise by more than 1% of what they are today, GM is effectively bankrupt. If not for the debt, GM may look like a good company. I imagine the only thing that will save GM from bankruptcy is a massive inflation. Interestingly, GM can cause such an inflation by buying silver, and pushing the price up to about $50/oz., by spending less than a billion dollars. GM has $27 billion on hand, so why not? But GM is not likely going to be able to sell $297 billion dollars worth of gold or silver to pay off their debt.
What is Richard Russell thinking? There is not enough gold or silver at these prices to pay off the dollar denominated debts, not at all. The debt load on society is perhaps $30 to $40 trillion, and there is less than $2 trillion in gold. If anything, people are more likely to take out a second mortgage on their homes, or borrow on their credit cards (strategies I do not recommend), and use the money to invest in silver bullion, not the other way around!
Historically speaking, allowing silver to be used as money is "inflationary" since silver would add to the money supply that consisted otherwise, only of gold. However, today it is different. Today, neither silver nor gold is used as money. Today, a deflation will be caused by bankruptcies, not by reducing silver's role as money. You cannot reduce silver's role as money any further than it already is, since silver it not being used as money anywhere in the world. With no monetary demand for silver, monetary demand can only go up, it cannot go down.
Furthermore, M3 could deflate all the way down to $4.5 trillion from the $ 9 trillion it is today, and the gold price could still skyrocket to $16,000/oz., instead of $35,000/oz. Deflation will not cause the gold price to drop, but rather, it will go up, regardless.
Now, on to interest rates.
If interest rates stay low, such easy money creation by the U.S. Federal reserve will create further inflation, and will cause gold to go up.
If interest rates go up, it will likely be the result of people selling more bonds than the Fed can buy, since the Fed has been buying bonds to keep up the bond market. Thus, if people sell bonds, it will be because they will be looking for another competing asset in which to invest that will provide a return, such as gold and silver.
Therefore, I do not care whether we have more or less inflation from here, I do not care where interest rates go from here.
The point I make is that it is the past inflation and money creation that has already taken place that will eventually catch up to us and will cause gold and silver to go way, way up. This is a much neglected point among market commentators.
How much money is there? How much wealth is there in bonds? These are the two biggest questions, often overlooked.
There is over $9 trillion in M3, money in U.S. banks. If all that money would be backed by the official U.S. gold of 261 million oz., the gold price would be over $35,000/oz.
There is over $20 trillion in bonds. If all that "money" was backed by U.S. gold, the gold price would be over $110,000/oz.
No changes in inflation or deflation, or changes in interest rates, can change those facts.
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The death of paper money!
Modern society today uses paper money, it is said, for "convenience" and by "mutual agreement". This is communism, make no mistake, and it will fail. Some people think that gold and silver have no future, unless everyone were to move to gold and silver all at once, and they do not see that happening, and so they are willing to "follow the crowd" and stay in paper money.
What they do not realize is how much money has been fraudulently created, and how few investors need to buy gold and silver to cause a major change in the prices!
By the time less than 1% of dollar holders sell dollars for gold and silver, the prices will far exceed $1000/oz for gold and $50/oz. for silver! Thus, it will not take a shift of all of society to create major price changes. And by the time silver rises to reach $50/oz. how many more people than 1% of society will want to buy silver? If it's more than 2%, we will have a positive feedback source of escalating monetary demand. And that's exactly how paper currencies fail. When they fail, they fail rather quickly, so that people literally have no escape and no warning, except for the warnings that are being issued now by people like me.
People who think they will be able to "follow the crowd" back into paper money will likely never get the chance, or they will move far too late.
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The big name newsletter writers.
At the gold show in Vancouver, many newsletter writers were very bullish on silver, moreso than gold. David Morgan, of course, is the recognized "silver guru", and there was myself, of course. Two other big names are Doug Casey, who is also bullish on silver. Doug Casey's latest newsletter covers the silver fundamentals. And Bill Murphy is bullish on silver, and has supported Ted Butler's work. Bill Bonner, at the gold show in New York in June 2-3, did not mention silver, but had just issued a silver informational email. Jim Dines is also bullish on silver.
The warnings are going out. Very well respected newsletter writers have investigated the silver situation, and are putting their reputations, and investment portfolios on the line, and into silver. Are you?
For more information, or to sign up for my free weekly silver stock report, please see GoldIsMoney.com
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Interestingly, Ted Butler wrote commentary this week that also expressed very high price expectations for silver, but Ted did not consider monetary demand. His title was, "$200 an Ounce Silver? – Can it Happen?" But Ted goes on to say that "that nothing bad has to happen for silver to hit $200, $500, or $1000." !!! Ted lists his reasons as
1. The coming short squeeze at COMEX
2. Lease repayment demands.
3. Industrial users panic.
4. Unbacked silver certificates
5. Depletion of World government silver inventories.
6. Too Much Money, Too Many People, Too Little Metal
$200 an Ounce Silver? – Can it Happen?
http://www.investmentrarities.com/06-14-04.html
I want to elaborate on a point Ted made in point #4. Ted writes that Swiss banks have issued silver certificates, perhaps in excess of the silver they hold. So, Ted concludes: "At some point, with a high price of silver, the issuers could panic and look to limit losses. Not necessarily at $8 or $10, but certainly at $20. What’s the only way for them to limit their losses? Buy silver."
Actually, the banks can temporarily limit losses also by SELLING silver, and I think this is what recently happened as silver dropped from $8 down to $6. I heard stories of Swiss silver being sent over on planes each day which drove the price down. This supply is unsustainable, of course.
You see, if you are bankrupt already, and have promised more silver than you can deliver, and the price is rising, and your operations are huge, you can actually sell silver to knock the price down, and thus, limit your paper losses. But only temporarily, of course. It's somewhat like transferring borrowed money from one credit card to another with a lower interest rate, to stave off bankruptcy. It works to keep the interest down, but it does not eliminate the debt, and the debt will actually keep increasing. Similarly, selling silver works to limit the paper losses, but it does not eliminate the silver debt, it increases it.
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The Silver Valley is bringing back the use of silver as money. A silver one-ounce coin, a "Sterling" to be used as a $10 piece.
http://shoshonenewspress.com/index.asp?Sec=News&str=2869
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I will be speaking in Idaho at the Silver Summit in September 23-24
http://www.silverminers.org/summit/index.html
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Some people have suggested that I contact Coast to Coast to try and be a guest on the show. I have. Please contact them if you would like to hear me on their show.
http://www.coasttocoastam.com/info/guestrequest.html
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SAFES: Need a safe to store your silver? Steve Miele in Grass Valley at the Sports & Swap shop can deliver a safe anywhere in the U.S., and can have a safe custom built to your specifications, such as to hold silver bullion. Call Steve at (530) 272-4179. If you get a very large, refridgerator-sized, heavy safe, in excess of 1000 pounds, you have to have it delivered to a local loading dock or Freight dock, and then arrange delivery from there, which is a bit complex, because you may need to hire several people at such a freight dock to operate a fork lift. (Sorry, I had the phone number wrong last week.)
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General Commentary on Silver (slightly modified from last week):
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. The following links contain email addresses for hundreds of different newspaper's "letters to the editor"
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 links 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
This final link 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, and many also want your full name, address and telephone number. 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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I wrote an article:
Miners to Use Silver as Cash - 27 November 2003
Apparantly, I was about 6 months too early in my predictions, but that's ok, I'm a very long term thinker and investor. I did not miss the mark by too much time, and if you think in terms of decades, I was right on the mark.
There are several companies that are increasingly deciding to hold their cash in the form of silver bullion. These companies are:
SSRI SSO.V (SILVER STANDARD RSC)
SRLM.PK (STERLING MINING)
NPG.V NVPGF.PK (NEVADA PACIFIC GOLD)
EDR.V EDRGF.PK (ENDEAVOUR GOLD)
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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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There are two excellent annual silver surveys 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.
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.
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Here are two U.S. Government produced reports on silver, containing data on years from 1900 to present, on U.S. & world production, and U.S. consumption, and U.S. industry & government stockpiles.
Report #1
http://www.goldismoney.com/ssr/USsilver.xls
Report #2
http://www.goldismoney.com/ssr/USsilver2.xls
I evaluated these government produced reports in my silver stock report #36.
In sum, we are running out of silver. The U.S. government had over 3 billion ounces of silver in 1940, and today, has very little left, or none.
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The Commodities Futures Trading Commission
The CFTC report on the allegations of manipulation in the silver market -- 9 page report
The CFTC report confirmes much of the research above, and almost outlines the bullish case for silver!
--My comments on the CFTC report ar in silver stock report #34 & #35
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Silver consumption, per capita, in the U.S. is the same today, in 2004, as it was in 1945.
And what is the per capita consumption of silver in the U.S. today? 5500 tonnes x 32152 = 177 million ounces of silver used per 285 million people. 177 / 285 = .62 oz. silver consumed per year, per person, in the U.S., whether in 1945, or in 2004. Each person in the U.S. today, on average, uses 6 tenths of an ounce of silver.
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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
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
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, check the numbers and follow the links:
1,000,000,000,000: 1 Trillion dollars
1,000,000,000: 1 Billion dollars
1,000,000: 1 Million dollars
$45,153,000,000,000: U.S. Household wealth, as of first quarter, 2004. (Includes Real Estate, and investments)
$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. annual 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. $469,000,000: 46.9 mil oz. of "registered" COMEX silver bullion @ $10/oz. http://tinyurl.com/vrcw
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:
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 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 four companies, BHP, GMBXF.PK, KGHM and BVN produce a lot of silver, but are way too 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
http://www.kghm.pl/en/index.php
--KGHM is the world`s sixth-largest copper producer and second or third in silver.
1163 tonnes of silver produced in 2001.
1163 x 32152oz.tonne = 37.4 million ounces of silver produced in 2001
--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 outstanding (not fully diluted)
@ $19.76/share
$10,512 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."
$10,512 million Market Cap / 1710 mil oz. = $6.15/oz. silver
You may get "approx" .97 ounces in the ground for 1 oz. silver's worth of stock, if the silver isn't hedged.
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 don't really count Barrick as a silver company, but it's listed here for comparison's sake, and due to popular/continuous demand.
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
214 mil shares outstanding (June 2004) not fully diluted
@ $4.22/share
$903 mil MC
"Current cash, cash equivalents and short-term investments stand at approximately $252.7 million at January 31, 2004, giving effect to recent $180 million offering of 1.25% Senior Convertible Notes due 2024, net of offering costs."
"At the beginning of 2004, silver reserves totaled 175 million ounces and gold reserves 1.4 million ounces."
175 + 14 = 189
(Produced 14.2 mil oz. silver in latest fiscal year (early 2004)
$903 mil MC / 189 mil oz = $4.78/oz.
You get "approx" 1.25 ounces in the ground for 1 oz. silver's worth of stock.
Additional comments: Wheaton recommends rejecting the CDE buy out offer:
Wheaton Does not Intend to Pursue the Coeur D'alene Mines Proposal: Recommends Shareholders Vote IAMGold Combination
Monday May 31
http://biz.yahoo.com/bw/040531/315071_1.html
Interestingly, as one reason, Wheaton says: CDE has a history of losses and negative operating cash flow.
Quarterly Loss Reduced From $31.2 Million a Year Ago to Just $3.0 Million in 2004's First Quarter
As of May 5th, CDE announced: No silver or gold hedge positions in place.
For the full year 2003, the Company reported a net loss of $67.0 million, or $0.40 per share, compared to a net loss of $81.2 million, or $1.04 per share in 2002.
Why does CDE continue to mine and sell silver at a loss? Why has CDE borrowed $180 million to continue expanding this business plan? Why couldn't CDE have raised the money from issuing more shares? Why has CDE stock increased from about 30 million shares outstanding at the end of 1999 to 214 million shares outstanding by the first quarter 2004? How was CDE able to secure such favorable terms for a loan? "giving effect to recent $180 million offering of 1.25% Senior Convertible Notes due 2024, net of offering costs."" Who did CDE borrow money from? Who stants to gain if CDE continues to produce silver at a loss?
If CDE produced silver at a loss during the first quarter 2004, how much money will they make if silver hits $10/oz? Perhaps the break-even price for production is a constant $8.00/oz.? Regardless of their "cash cost" numbers. If so, and if CDE produces 15 million oz. of silver per year, then at $10/oz., CDE may make up to $30 million dollars, at the most, from their silver production, if none of their other costs like energy costs rise in price due to inflation. Mining uses a lot of energy, just so that you know, so I don't think it is likely that CDE will have profits even with higher silver prices in the $8-10 range due to inflation. Given that CDE has a market cap of up to $1000 million dollars, CDE just is not worth it at all, in my opinion. And neither would CDE stock be worth the price if they had a market cap of $300 million, in my opinion. I would rather own silver, as it moved in price from $6 to $10. And in the meantime, CDE may well move in price from $6.49/share down to $2.16/share (assuming no further dilution, and a reduction to a more reasonable $333 million market cap), and by then, with silver at $10, CDE may have a P/E ratio of 10, and a huge heavy debt load of $180 million dollars that may take up to 6 years of possible profits to pay off.
At $2.16/share, $10 silver, and a P/E of 10: $333 mil MC / 189 mil oz. = $1.76/oz. = You'd get about 5.68 oz. of silver for each silver oz. worth of stock.
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)
@ $3.60/share
$1431 mil MC
419 proven and probable reserves of silver (from 2002 annual report on website)
$1431 mil MC / 419 oz. silver = $3.42/oz.
You get "approx" 1.75 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.
I've heard rumors that Penoles is running out of silver at one of their big mines, perhaps only a year or two of silver left. This particular rumor caused the man who heard it to investigate and invest in silver, so apparantly, he believes that the rumor is true. I have no further information at this time.
GRS GAM.TO (GAMMON LAKE)
http://www.gammonlake.com/
gammonl@sprint.ca (902) 468-0614
62 mil shares Fully Diluted: (Feb 27th, 2004)
@ $7.22/share
$448 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.
$448 mil MC / 231 mil oz.= $1.94/oz.
You get "approx" 3.08 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:
At 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.
GAMMON LAKE INTERSECTS 1-METRE OF 390 GRAMS PER TONNE GOLD
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