-- Posted 4 October, 2004 | |

I recently attended the Second Annual Silver Summit in Coeur d’Alene Idaho.  It was my second time and it was even better than the first.  Many professionals in the industry, to which I am grateful, shared their knowledge and outlook with attendees who were also blessed by the opportunity to hear mining CEO’s who took precious time from their company’s management duties to personally educate and mingle with investors.  We even saw a “self-ordained silver prophet, silver guru, silver mining expert,” who admittedly has all of approximately four year’s experience in silver.  He sends out a mining analysis letter to thousands of investors who may use his calculations of silver ounces in the ground owned by each company, among other things, to make fundamental comparisons with each company on the list. 

As a long-time silver buff, I find his computations somewhat useful and appreciate his analytical number crunching.  I use numerous sources for company evaluations, and the comparisons he provides are just one of many.  His legal pump and dump scheme, however, has apparently lured many novice investors into taking a look at his personal portfolio in hopes of getting a piece of the action.  He acknowledges taking positions in companies shares prior to his publications (pumping), but denies the “dumping” aspect due to having participated in private placements that have restricted the sale of some but not all of his equities.  In my opinion, an analyst who recommends exclusively shares of companies with a small float and market cap, whose share prices can be easily affected by a small number of investors, has a hidden agenda.

His frequent quotes of Biblical Scriptures upon which he bases his critiques of sound mining company’s financial practices don’t hold water with any seasoned investor or business manager who has cut his teeth in the real world.  The problem with this silver guru, is “the following” he has attained by so many get-rich-quick and uninformed investors whose decisions affect share prices.  It has progressed to the point where CEO’s of some prominent companies have been prompted (reduced) to personally addressing his ranting and inter-net postings.  Some of the naïve people at the Summit with herd mentality, supported his absurd ideas when he openly challenged financial and operational approaches of qualified managers of company giants in the industry like Pan American Silver and Hecla Mining.  

A big issue is being made of the fact that a few well-managed companies including Silver Standard, Sterling Mining, and Endeavour Silver have purchased silver bullion with a portion of their cash reserves.  Many silver buffs (myself included) agree that this is a good place to park dollars that aren’t earmarked for use in operational expenses or reserve expansion through drilling or acquisition.  To state outright that companies not engaged in doing this with their cash is a disservice to shareholders is absurd. 

The idea of boycotting or abstaining from the purchase of shares in companies like PAAS or HL, because they are using their cash to accumulate silver in the ground for pennies per ounce, instead of purchasing bullion for dollars per ounce is insane.  His ridiculous notion that all companies should acquire 100% of their capital through the issuance of more shares (dilution) instead of borrowing, on the sole basis of “scriptures” about debt and usury has more holes in it than a sieve.  How many businesses in the world would we have if no one borrowed start-up funds?  GIVE ME A BREAK!  

I’ve been a successful business owner and precious metals investor for more years than this self-ordained guru who discovered silver four years ago has been alive.  I’m absolutely dumbfounded at the attention he is given by gullible sheeple, conference programmers, and investors seeking his advice and views on silver investments.  This will no doubt substantiate once again that most investors get what they deserve and not what they expect. 

Don’t get me wrong, longevity in the investment arena might earn someone recognition as a survivor, but not necessarily an expert, and I don’t pretend to compare myself with the people who are legends in this world of investment strategies and opportunities.  My credentials are based on my own personal failures and accomplishments.  I truly believe silver is presenting an opportunity of a lifetime.  Essentially all of my liquid assets are in silver and companies that are involved with mining or finding it.  I give the person who is the main subject of my criticism, credit for recognizing at his young age, the fabulous situation that presently exists in silver.  He also has the intelligence and initiative to capitalize on people’s ignorance, greed, and money through his bold prognostications and “a look at his portfolio.” 

The road to monetary riches, if not inherited or gifted, is through hard work, education, living below one’s means, and intelligent investing of the resultant accumulated savings, not by blindly following some Johnny-come-lately Pied Piper.  Because as the old sayings go, in a strong wind even the turkeys will fly, and a rising tide raises all boats, most silver investments will probably perform very well for years.  However, to omit a major primary silver producer like PAAS from a portfolio of precious metals companies because they “might borrow money” or because they don’t purchase their own product on the open market is ludicrous.

Primary silver behemoths like PAAS, SRLM, SSRI, HL, and some of the smaller producers like EDR are the result of good management by competent people who know the industry.  They didn’t get where they are by following the whims of every child prodigy that thinks he has a great idea or could do a better job.  Any self-proclaimed expert can be critical or identify errors made by mining and exploration management, but getting out in the real world and building successful companies that are profitable and provide jobs for thousands of people is proof of the pudding.  I’m placing most of my hard-earned money on management with proven track records, and whose companies are in the front of the line when it comes to profitably getting silver out of the ground.  If price increases in silver don’t continue for decades and reach infinity (which they won’t), these are the kind of companies that are best positioned to capitalize on a silver bull market that might not last forever. 

Oh, I guess I forgot. It’s different this time!

Dr. Garry Mathews

Private investor

Disclaimer:  Dr. Mathews has an interest in silver and other precious metals bullion, including but not limited to buying and selling shares of companies mentioned.  He stands to profit from an increase in their value, but hasn’t been compensated in any way or paid to write this article.  He is not a financial advisor and nothing said should be construed as investment advice.  All investors should do their own due-diligence prior to making investment decisions.