The Premier Silver Resource Website

Live Spot Silver
Silver Market Articles
Silver Discussions at the Forum
Silver Company Links
Silver Market Updates
Silver & Gold Headlines
Silver Stock News
Silver Equity Quotes
Silver & Precious Metals Quotes

Keith Neumeyer: The Silver Market Lacks Integrity

By: Ron Hera

-- Posted 22 November, 2011 | | Discuss This Article - Comments:

©2011 Hera Research, LLC


The Hera Research Newsletter (HRN) is pleased to present an incredibly powerful interview with Keith Neumeyer, Chief Executive Officer, President and Director of First Majestic Silver Corp. (TSX:FR / NYSE:AG).  Mr. Neumeyer began his career at the Vancouver Stock Exchange and worked in the investment community for 26 years beginning his career in a series of Canadian national brokerage firms including McLeod Young Weir (now Scotia McLeod), then Richardson Greenshields and then Walwyn Stogell McCuthchen (which became Midland Walwyn).


Mr. Neumeyer moved on to work with several publically traded companies in the natural resource and high technology sectors.  His roles have included senior management positions and directorships in the areas of finance, business development, strategic planning and corporate restructuring.  Mr. Neumeyer, who has listed a number of companies on the Toronto Stock Exchange, has extensive experience dealing with financial, regulatory, legal and accounting issues.


Hera Research Newsletter (HRN): Thank you for joining us today.  Letís begin by talking about silver supply and demand.


Keith Neumeyer: Silver mine production was around 736 million ounces in 2010.  Demand was around 1 billion ounces.  Scrap silver recycling and some government sales filled the gap.  Weíre at historic lows in terms of above ground silver.  Eric Sprott recently said there are 1 billion ounces of triple nine silver left aboveground.  Unlike gold, silver gets used.  Weíre at historic highs in supply when it comes to gold, but the exact opposite is true for silver.


HRN: Is there a deficit in terms of mine supply?


Keith Neumeyer: Weíve had a supply deficit for the past 13 years.  2009 was the first year we created equilibrium.  We only went into a surplus in 2010, in terms of industrial and jewelry fabrication demand.  The surplus mine supply was purchased by investors, obviously.  A lot of mining companies are showing lower production because a lot of silver comes from base metals and, with lower base metals prices, itís becoming more difficult.  I donít see any major supply drivers for silver in the next several years.


HRN: Do you expect more scrap silver to enter the market?


Keith Neumeyer: Thatís what happened in 2009 when gold rallied over $1,200 and then corrected to below $1,100.  It was primarily caused by scrap gold entering the market.  I believe the same thing was happening for silver.  Weíll see that again as the metals make new highs.  Itís the same as a stock.  You replace part of the shareholder base at different levels.


HRN: Are you optimistic about future demand?


Keith Neumeyer: Yes, Iíve been optimistic about silver since 2002 because silver is a strategic metal.  I think itís more important than gold.


HRN: Are there new applications that could increase demand?


Keith Neumeyer: Weíre seeing all kinds of new applications.  A recent report by Barclays forecast that 120 million ounces of silver will be used for solar power generation in 2012 versus 40 million ounces in 2009.  The battery industry is growing as well.  Zinc-silver batteries provide very stable capacityótheir output doesnít degrade like lithium batteriesóand they deliver 40% more energy compared to nickel metal-hydride batteries.  Theyíre safer than water-based chemical batteries because they donít heat up or explode.  Theyíre also mercury free and 95% recyclable.  Lithium-ion batteries in cell phones, for example, need to be replaced after 12 to 18 months.  Iím very optimistic about battery technology.  There are also robotics and other applications on the horizon.



HRN: Whatís your long term price target for silver?


Keith Neumeyer: Silver will reach a value based on its natural ratio of 15:1 with gold.  I expect to see at least $2,000 gold and most likely $3,000 in the next 3 to 5 years, so silver will be between $130 and $200.  Itís a big number from where we are today but thatís where I think weíre headed.  Weíre dealing with a market that needs to be corrected.


HRN: Isnít the price of silver set by supply and demand?


Keith Neumeyer: I donít think supply and demand has anything to do with the price, unfortunately.  The world we live in today is a paper environment where silver is priced by financial circumstances.  Banks, traders and investors around the world move markets to where they want them to be.  Governments and commercialsóbig banks like HSBC and JP Morganóall have a piece of the action.  They alternately work together or sometimes against each other.  All these forces price the metal.  Thatís one reason weíre seeing the volatility that weíre seeing today.



HRN: How can supply and demand be irrelevant?


Keith Neumeyer: In short term trading, the price is financially driven.  Eventually, markets do correct themselves over time.  In the long run, supply and demand does have influence.  Thatís why the price will ultimately return to its natural ratio of 15:1.


HRN: How is the price of silver financially driven?


Keith Neumeyer: It has to do with the financial instruments that we trade in and with the fact that silver trades a billion ounces per day on the COMEX alone when there are 26 to 30 million ounces of silver available for delivery.  With that kind of leverage, you just donít have a proper market.


HRN: It has been reported that there are 100 ounces under contract for every ounce in the COMEX warehouse.


Keith Neumeyer: The governments, regulators and bullion banks have let the silver market get more and more leveraged.  Weíve seen a lot of wealth destruction as a result of this leverage and weíre going to see a lot more until, finally, the governments decide to change the system.


HRN: Isnít the COMEX guaranteeing market integrity, by raising margins, for example?


Keith Neumeyer: I donít buy the argument on margin hikes at all.


HRN: Donít margin hikes prevent dangerous asset price bubbles?


Keith Neumeyer: Itís not up to them to decide what is parabolic.  Theyíre not investors themselves.  They donít have money in the market.  They decide a bubble is going to happen if they donít raise margins but no one knows when a bubble is forming.  It is only apparent after itís already happened.  By hiking the margins, they create the appearance of a bubble bursting.  They create the bubble.  They create the proof that it was a bubble.  If they let it alone, the market would stabilize by itself.


HRN: What should the Commodities and Futures Trading Commission (CFTC) do?


Keith Neumeyer: The job of the regulators is to protect the retail investor.  Thatís their only job.  Itís not to protect the banks or the brokerage firms.  The little guy is the primary taxpayer.  Why were the Securities and Exchange Commission (SEC) and the CFTC put in place?  They were put in place to protect retail investors.  Prior to regulation, the banks controlled the market.  Today, the banks control the market again.  Who should control the market?  Retail investors.  Whoís protecting them?  No one.


HRN: Are you saying that the CFTC does nothing while the COMEX caters to banks and brokerage firms?


Keith Neumeyer: Yes.


HRN: And the COMEX doesnít serve retail investors?


Keith Neumeyer: No.  Absolutely not.


HRN: Do you foresee a return to a free market in the future?


Keith Neumeyer: Iím an optimist.  I believe one day that governments will rewrite the rules and force the regulators to protect investors.  Thatís where we were back in the Ď70s and thatís where I think we have to be again to correct the problems that have arisen over the past 40 years.  Silver is being revalued.  Itís going to affect a lot of people along the way and it will change the financial system.  Ultimately, weíre going to have a new financial system and, hopefully, weíll go back to natural markets, completely driven by supply and demand.  It may take another 20 years but I think it will happen.


HRN: A new financial system?


Keith Neumeyer: If Iím wrong, the banks will run the world, even more so than they do today, 10 or 20 years from now.  God forbid that we ever get there because thatís a one currency, one government world that would absolutely be a disaster for the human race.  There would be no freedoms at all to move or to invest.  It would be like having shackles on our ankles.  There is a movement to go in that direction, unfortunately.  There are a number of very wealthy people that want to see that.  I hope that we can find the politicians to prevent that type of world from coming to pass.


HRN: Thank you for your time and for your candor.


Keith Neumeyer: It was a pleasure.



After Words


Keith Neumeyer, Chief Executive Officer, President and Director of First Majestic Silver Corp. (TSX:FR / NYSE:AG) is an industry leader who analyzes the silver market with the gloves off.  In the wake of the failure of commodities trading firm MF Global, Mr. Neumeyerís lack of confidence in the CFTC and in the integrity of the COMEX appears to be justified.


First Majestic Silver, which is one of a small number of primary silver producers, has consistently increased its production, cash margins and mineral resources while lowering production costs.  With three operating mines and a fourth mine under construction, the company is growing steadily from a junior producer to a mid-tier producer that expects to produce 10 million ounces of silver in 2012.


Editorís Note: Hera Research, LLC or its Directors are shareholders in First Majestic Silver Corp.




Hera Research, LLC, provides deeply researched analysis to help investors profit from changing economic and market conditions.  Hera Research focuses on relationships between macroeconomics, government, banking, and financial markets in order to identify and analyze investment opportunities with extraordinary upside potential. Hera Research is currently researching mining and metals including precious metals, oil and energy including green energy, agriculture, and other natural resources.  The Hera Research Newsletter covers key economic data, trends and analysis including reviews of companies with extraordinary value and upside potential.




Articles by Ron Hera, the Hera Research web site and the Hera Research Newsletter ("Hera Research publications") are published by Hera Research, LLC. Information contained in Hera Research publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in Hera Research publications is not intended to constitute individual investment advice and is not designed to meet individual financial situations. The opinions expressed in Hera Research publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and Hera Research, LLC has no obligation to update any such information.


Ron Hera, Hera Research, LLC, and other entities in which Ron Hera has an interest, along with employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. The policies of Hera Research, LLC attempt to avoid potential conflicts of interest and to resolve conflicts of interest should any arise in a timely fashion.


Unless otherwise specified, Hera Research publications including the Hera Research web site and its content and images, as well as all copyright, trademark and other rights therein, are owned by Hera Research, LLC. No portion of Hera Research publications or web site may be extracted or reproduced without permission of Hera Research, LLC. Nothing contained herein shall be construed as conferring any license or right under any copyright, trademark or other right of Hera Research, LLC. Unauthorized use, reproduction or rebroadcast of any content of Hera Research publications or web site, including communicating investment recommendations in such publication or web site to non-subscribers in any manner, is prohibited and shall be considered an infringement and/or misappropriation of the proprietary rights of Hera Research, LLC.


Hera Research, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of Hera Research publications or website, any infringement or misappropriation of Hera Research, LLC's proprietary rights, or any other reason determined in the sole discretion of Hera Research, LLC. ©2009--2011 Hera Research, LLC.

-- Posted 22 November, 2011 | | Discuss This Article - Comments:

Article Archives is presented to you by:

© 2003 - 2011, Silver Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.


The views contained here may not represent the views of, its affiliates or advertisers. makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of, is strictly prohibited. In no event shall or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.