Hyperinflation

Diversifying Geo-Political Risk: Metal Miners for Every Region of the World

I agree 100% as mining is an inherently risky industry. I would definitely recommend having at least 25%-50% (depending on your knowledge of the industry and individual miners) in gold and silver royalty companies(as far as your allocation to these miners go). My largest position is in Silver Wheaton (SLW), with Franco Nevada (FNNVF.PK) / (FNV.TSX) being my 5th largest.

If I wanted exposure to the appreciation in gold and silver via mining equities, I would own both a gold and silver royalty company, the GDX and GDXJ ( giving you exposure to a diversified group of Senior, Mid-Tier, Junior and to a lesser extent exploration companies), as well as a few individual miners which catch your eye for whatever reason ( valuation, potential, growth, etc).

This is just my personal opinion but these are my personal favorites in each class of miners, all of which I own.

Senior Producers - I think Goldcorp is without a doubt the best Senior producer, being one of the few actually growing production as opposed to miners such as Barrick and Newmont. Barrick and Newmont have to engage in new flagship operations ( which require a few billion in capital requirements) just to replace the mines soon to go offline.

Mid-Tier - Picking a favorite in this group is much more difficult as my four favorites are all unique. That being said, this is how I would rank them.
Yamana (AUY) - They have finally started to get their act together and will likely be the first current mid-tier producer to reach the 2m oz/annum level ( with the exception of Newcrest). They also have a great portfolio of projects, which diversifies some mining risk. Furthermore, it is a great way to play South America (more specifically Argentina, Brazil, Chile).

2) El-Dorado Gold - (EGO) El-Dorado has been reporting great drilling results lately, which coupled with their acquisition of Sino Gold, makes them a great way to play China.

3) Agnico - Highest production growth profile of the mid-tier group ( from 580k in 2009 to an estimated 2m oz by 2013-2104. I would rank Agnico much higher given it has substantial exposure to mining friendly Canada, but it has also tended to trade with a rich valuation on all fronts.

4) Lihir Gold - A great turnaround story that doesn't get much attention. Their flagship mine, Lihir Island, is among the best in the world. Proven reserves nearly reaching 40m oz and a large resource base ( reserves are likely to increase substantially given the quality of this mine and the size of the resource base). But Lihir stands out a valuation play both in future cash flows as well as other metrics i.e reserve ratio.

Junior Miners-
1) Jaguar - Has a nice mining portfolio, one of the best 5 year growth profiles and incredible valuation.
2) Kirkland Lake - I will be writing an article on Kirkland Lake Gold as it is also a great story ( discussed in the article), incredible potential, great growth profile ( nearly 10 fold over the next 3-4 year based on current estimates which will likely be guided higher as they have conducted some very impressive drilling results). It is also focused solely on Canada, one of the friendliest mining countries.
3) There are numerous other, some of which are mentioned in the article and others by those leaving comments i.e Great Basin Gold.

Royalty Companies -
1)Silver Wheaton - ( 270% production growth from 2009 to 2013/2014), fixed inputs costs ( giving it 100% protection from inflation), royalty contracts with the two largest gold producers, largest contracts lasting in excess of 20 years. It also has additional upside potential in the several interests it has with the like of Aquilene ( to be acquired by Pan American).
2) Franco Nevada- More diversified, slightly better growth profile and better valuation than Royal Gold. It also has the added advantage of having an incredibly strong balance sheet, which will likely be used to fund future growth.
3) Royal Gold

Silver-
1) Silver Wheaton
2) Coeur d' Alene mines
3) Silver Standard
4) First Majestic
5) Silvercorp
6+) Fortuna, Pan American, Hecla, ECU, MAG silver

Hope this was of any help -

On Nov 27 05:16 PM User 422955 wrote:

> Good work, Hyperinflation! Your spelling, grammar and syntax are
> better than I've seen. Keep up the good work.
>
> The difficult task is to figure out which one(s), out of so many
> gold and silver miners, to buy. This article doesn't help with that.

Diversifying Geo-Political Risk: Metal Miners for Every Region of the World

I haven't yet been to South Africa, but have a few friends that live there, which along with non-stop mining accidents or killings has made tend to avoid it. They just tell me how bad it is and some experiences they have had, making me more bias against SA.
If they can get it together, owning mining companies in South Africa would be extremely lucrative due to the higher grade ore and bi-products like rhodium, palladium, etc instead of the typical base metals. What are your thoughts on West Africa?


On Nov 25 08:59 AM Marco G. wrote:

> Hello Hyperinflation,
> I see may favorite, Great Basin Gold, did not make your list. See
> my report:
> seekingalpha.com/artic...
>
>
> Maybe, that is good as they will soon jump to mid tier gold producer
> status with ~ 400k oz Gold equivalent production. They are under
> radar presently with just 110k production from Hollister in Nevada.
> Burnstone is a brand new mine in South Africa commissioning startup
> in June 2010. It is a shallow low risk mine, the first new mine
> in Witwatersrand in 30 years. But, I know South Africa is not your
> cup of tea. The time will come for South Africa to come back into
> favor.
>
> Great article, as I agree with most of your comments and thanks.

Diversifying Geo-Political Risk: Metal Miners for Every Region of the World

I'm also familiar with BTO and it is another miner I could have listed. I think Kinross will end up buying them out as they have been increasing their ownership stake on a consistent basis, plus it would also help them reduce their reliance on their Russian operation.


On Nov 25 03:10 PM mjrcme wrote:

> Thanks Hyper:
> Check out B2 Gold (BGLPF) (BTO.TO)

Diversifying Geo-Political Risk: Metal Miners for Every Region of the World

I familiar with great basin, but its hard to put every emerging junior (under 1m oz of annual production) in any one article. Have you taken a look at Kirkland Lake? Its quite an interesting story as they basically bought a handful of mines that were thought to been cleaned out years ago, only to find multiple gold deposits. They recently finished some diamond drilling with great results. They are set to produce just 48k oz this year, jumping up to 500k by 2013 (though it will likely be higher as drilling results continue to show more and more reserves and total resources).

I guess I chose Kirkland because they not only have a 3 year production growth profile of 1000%, reaching approx 470-490k oz by 2013 from just 48k in 2009, but because the ongoing drilling results provide several potential catalysts for the stock. Should I have focused on Canada or the America's in general, great basin would surely be on there.


On Nov 25 08:59 AM Marco G. wrote:

> Hello Hyperinflation,
> I see may favorite, Great Basin Gold, did not make your list. See
> my report:
> seekingalpha.com/artic...
>
>
> Maybe, that is good as they will soon jump to mid tier gold producer
> status with ~ 400k oz Gold equivalent production. They are under
> radar presently with just 110k production from Hollister in Nevada.
> Burnstone is a brand new mine in South Africa commissioning startup
> in June 2010. It is a shallow low risk mine, the first new mine
> in Witwatersrand in 30 years. But, I know South Africa is not your
> cup of tea. The time will come for South Africa to come back into
> favor.
>
> Great article, as I agree with most of your comments and thanks.

Four Overlooked Emerging Junior Miners

Well the $36.09 assumes a $1250 long term price gold. I was just making reference to the severe relative undervaluation. Though I do believe, JAG will be worth somewhere between $30-$50/ a share sometime in the next 2-4 years. Yeh I wished i would have picked up more at $3.00/share...

-JMO

The Case for Precious Metals Is Only Getting Stronger

I agree, you don't even have to look that far back in history. Zimbabwe doesn't really share the any of the same characteristics with regards to how they approached de-basing their currency into oblivion. The Zimbabwe economy is one where most citizens didn't have bank accounts and whose transactions were completed mostly in cash. The U.S economy is one where everything is done electronically, thus inflating doesn't require physically printing every dollar. Even Ben Bernanke has admitted as much when he publicly said they more or less increase bank reserves by adding 000's to the banks account at the FED. This is very reminiscent in my opinion of the Hyperinflation in Argentina back in 1990, where they relied on electronic means to inflate.

On Oct 11 01:14 AM User 498681 wrote:

> This is a real entertaining article and thread, these are the numerous
> problems I see in the current crisis as a American citizens born
> and raised. You always have to look back to history as a very good
> predicator of what the future entails. I will not go to far back
> but in the early 1900's when the stock market was in its early days
> there was hardly any regulation and big doggs could inflate stocks
> making it look promising then manipulate the price with their buying
> power. Now present day 2009 a lot of American's believe that some
> how things have changed or we can regulate the stock market and the
> housing industry. The problem is history repeats itself I see the
> same thing going on to this day wealthy crooked business men selling
> uninformed people mutual funds and stocks and such that will not
> perform in the long run. Call me crazy but I say silver is the way
> to go currently. At its closing price of 17.70 usd if you have say
> invest 5 or 10 grand you can get enough of it right now to possibly
> flip it in the next couple of years and make a substantial profit.
> Thats just my two sense and my opinion on what the future holds.

The Case for Precious Metals Is Only Getting Stronger

That is an excellent point. I was thinking the exact same thing back late last year and thus put my money in international brokerages (so I buy everything on other exchanges) in addition to holding some physical certificates (yes i know that sounds archaic, but extreme times calls for extreme measures). I would also like to point out you can store these metals in the Perth mint, Canadian Royal Mint or swiss Bank accounts. Assuming that does happen, The U.S. would likely become the first underdeveloped nations as only dire circumstances would bring them to such extremes.
Note: Prior confiscation by the U.S government was voluntary and people willing to give up their wealth to bureaucrats deserve to have it taken away (joke). I also think US bank safety deposit boxes present a danger. I would Bury my metals in the ground and draw a treasure map sooner than give them to a bank.


On Sep 21 11:56 PM The Recusant wrote:

> I agree with the author's ideas almost entirely. However, I would
> love to hear how the government will react to the situation of high
> inflation once it gets moving. Of course, they will attempt to raise
> interest. Perhaps they will allow the dollar to devalue to a obscene
> point to encourage exports that would boost employment. Hopefully
> they won't confiscate gold or silver. They could, however, pull numerous
> other rabbits out of their silk hats, like forbidding foreign investments
> or even nationalizing the PM mines in the US. What other ways would
> have to squeeze us? Got any ideas?

The Case for Precious Metals Is Only Getting Stronger

If you adjust for inflation i.e how they computed the CPI in the late 70's and early 80's (which John Williams from shadow government stats does to a T) , you come out with a inflation adjusted priced excedding $6,000/oz. While that may seem like a longshot, look at oil when it was in the teens and shit up to 150. I'm not making any predictions, but assuming you average the two , lets say $4,000/oz, that is a good return. Better yet is the potential for silver, especially if it reverts back to a 40:1 ration (though 20:1 is argued by many). This equates to 4000/40 = $100. This is a spectacular return even if it only achieves half that price appreciation. It is definitely worth having your head in the game


On Sep 21 08:24 PM Clint007 wrote:

> When I heard people saying the price of Gold is "very" high! That
> make me :) and lol
> But I can say it is very cheap not, I can say only barely moving
> up.
> Look here ---------------- "January 21st, 1980's legendary gold
> close of $850 translates into $2358 in today's dollars! So what the
> financial media is gleefully calling an all-time high today, insinuating
> gold is radically overbought and due for a plunge, isn't even halfway
> up to this metal's real all-time high. As of Wednesday's $1018 close,
> gold had merely climbed to 43% of the climax of its previous secular
> bull."
> This article explain everything (VG good read):
> www.gold-eagle.com/gol...

The Case for Precious Metals Is Only Getting Stronger

The black market is by far the best, and if you believe in the precious metal story, many will develop. I only say this because I don't trust the government in the least and like to have the smallest paper trail possible. i'm in Australia right now and I pay cash for my bullion (even though I'm a U.S citizen), and they buy-back at very fair prices and none of it is recorded electronically. if you buy in denominations of less than 5k here you don't even need an ID to show them.
-Just a comment to add to yours- though Ebay is basically like a black market in itself.


On Sep 21 03:18 PM optionsgirl wrote:

> I read that ebay is a good way to sell physical metal, because you
> are not subjected to the broker's fee- you have to set up a paypal
> account or somehow assure prompt payment prior to the sale.
> Holding onto physical is really the whole point though, just like
> DG advised.

The Case for Precious Metals Is Only Getting Stronger

It has collapsed, printing money to bail everyone and their mother out doesn't change that fact. I don't think anyone is in favor of 100% allocation of their assets in the metals but a portion. Gold is extremely easy to store and even hide in your house with a underground fireproof safe. Being prudent never hurt anyone.


On Sep 21 02:25 PM tuj wrote:

> "You must be assuming we go back to caveman status and remain there."
>
>
> So why take physical delivery? If its an "investment" then why not
> remain financial? Unless you believe the financial system will collapse,
> which would probably be akin to "caveman status".

The Case for Precious Metals Is Only Getting Stronger

Love it - I am seriously surprised I haven't been ridiculed that much for this article as many past writings on more or less the same subject have been attacked five ways from Sunday.


On Sep 21 01:06 PM mr freddo wrote:

> But wait. Ben said the recession was over. Don't you believe him?
> A weak recovery yes, but growth rather than contraction.
>
> Strangely, the last time we hit full blown meltdown paranoia, the
> dollar rallied as treasuries became the safe haven investment. This
> perverse effect caused gold and silver to slump during the worst
> of the crisis, just when we gold investors thought it would skyrocket.
>
>
> The USA is like Roger Federer. Still the champ until taken down.
> We are in the 5th set of this match and it looks like we have some
> problems ahead. But will it break the USA? Will we crumble and
> be replaced? Or will we be able to hold serve and muddle through?
>
>
> History tells us that the champ, no matter how good, eventually gets
> beaten as Roger did at the US Open.
>
> The new champ will be China. They have been able to combine strategic
> planning with capitalism to come out on top in the next 10 years.
>
>
> If you review the events of the last 10 years in the US, you have
> to conclude that capitalism is a poor strategic planning mechanism.
> Greed creates bubbles and bubbles destroy wealth.
>
> Look at the California Energy Crisis, the Sub Prime crisis, our energy
> policy (none for 25 years) and you will see a total lack of strategic
> vision and a reliance on greed (and Cheney) to make our decisions.
>
>
> The Republican mantra of deregulation had led us to the brink of
> ruin.
>
> Unfortunately, the party that replaced them in power is even more
> clueless as to how to run an economy. They believe, deep down, that
> value is created by attorneys and will create a system where attorneys
> thrive and entrepreneurs must find a new way to make a living because
> it is just too difficult to start a new company in a worker/lawyer
> dominated economy.
>
> Democrats want to give it away, and anyone who has run a business
> knows that if you give it away, you will be gone in short order.
>
>
> So I say hedge your gold, silver, Oil and Agriculture with some hot
> growth stocks from China.

The Case for Precious Metals Is Only Getting Stronger

All the US banks - at least the largest 19 money center banks, with a few exceptions, HAVE already gone bankrupt! - If you don't buy that premise than no major U.S. company can ever go "bankrupt".


On Sep 21 10:16 AM tuj wrote:

> What the heck are you going to do with physical gold? Ultimately
> you'll have to take it to a retailer and lose premium on it. Now
> if you think all the banks are going to collapse and so is the USD,
> you should put your money in a bunker and stockpile food and water
> rather than gold. If the apocalypse happens, I don't think anyone
> will care about your gold coins when they are hungry, thirsty, and
> need petrol. Or at least have some smelting equipment so you can
> make new denominations.

The Case for Precious Metals Is Only Getting Stronger

I think gold and especially silver will actually increase your wealth in the coming decade for 2 reasons. 1) Both are very undervalued (especially silver at the current market price) 2) 2010 will be the decade of global inflation - Look back to the late 70's inflation which was more or less confined to the U.S and inflation adjusted prices seen then. Now imagine the U.S doing the same thing on a much grander scale augmented by the next largest world currency "Euro" inflating (though to a much lesser degree, which isn't saying very much) as well. There will come a day when there is a gold mania, in other words, the demand for physical holdings goes to the moon.

-Just my two cents


On Sep 21 03:09 PM doubleguns wrote:

> My physical bullion is an insurance policy for an event that could
> occur like a collapse in the fiat currency. It is not likely but
> it is getting more likely by the minute as Ben and Timmy keep the
> presses rolling. Many other events could cause this also and I do
> not have a crystal ball to tell you what they are. If you have car,
> home, life ect... insurance than you understand what physical metal
> is for. You should not sell your physical. You may need to "spend"
> it.
>
> Play with the miners, ETF's or any paper metal to make money. <br/>
>
> Do not play with physical to make money. That you keep and pass on
> to your children as an inheritace. Somewhere along the way it WILL
> be needed. Consider it LIFE insurance that YOU may actually get to
> spend yourself some day. Hopefully you dont!!!
>
>
>
>

The Case for Precious Metals Is Only Getting Stronger

I agree - I have a feeling you will accumulate massive amounts of real purchasing power over the next 2-5 years while others watch theirs disappear. - Wow I was ready for 100% criticism for this piece


On Sep 21 04:04 PM 5142152-337 wrote:

> I have two safes full with gold and silver! Why, because I don't
> TRUST our government, AND Wall St. Buying PAPER silver and gold
> is, to me, OBSCENE...and STUPID. Of course, that's just me...and
> my accumulation has done very well, indeed, these past few years!

The Case for Precious Metals Is Only Getting Stronger

what the heck are you going to do with worthless paper money?


On Sep 21 10:16 AM tuj wrote:

> What the heck are you going to do with physical gold? Ultimately
> you'll have to take it to a retailer and lose premium on it. Now
> if you think all the banks are going to collapse and so is the USD,
> you should put your money in a bunker and stockpile food and water
> rather than gold. If the apocalypse happens, I don't think anyone
> will care about your gold coins when they are hungry, thirsty, and
> need petrol. Or at least have some smelting equipment so you can
> make new denominations.