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Seraphim Blentzas  

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  • The Silver Singularity Is Near [View article]
    or it can happen quickly if companies partner together (seabridge and pretium). timeframe is also different depending on countries, China and Peru which are top producers have had no problem increasing annual production rates fast even when prices did not increase.

    There are other factors to consider such as politics and how eager a community is to reap the benefits that come in the form of jobs, investment, royalties. don't underestimate political motivation

    higher prices allow for higher cash costs and that gives companies more money to spend on infrastructure, trucks and roads which allows it to work around environmentally senstive areas.
    Jan 29, 2012. 02:03 AM | Likes Like |Link to Comment
  • The Silver Singularity Is Near [View article]
    100 million vehicles manufactured in 2016. would 1 million electric cars really make a difference? how many decades will it take developing countries to afford the expensive electric car?

    Hybrid vehicles which also use catalytic converters are showing stronger growth than electric.

    Silver prodcution is in the hundreds of millions. Palladium production is 5 to 8 million roughly equal to industrial demand which is growing rapidly. platinum group metals are already available in bullion. They will attract more bullion investment when that happens more dealers will buy and sell them lowering the premium cost and attracting more individual investment. That is an alternative that isn't widely available yet.
    Jan 29, 2012. 01:36 AM | Likes Like |Link to Comment
  • The Silver Singularity Is Near [View article]
    First if you're to consider the big picture ignore the graph used in the article. The graph only shows U.S. production and UNLIKE THE REST OF THE WORLD & 3 OF THE TOP 4 MAJOR PRODUCERS THE U.S. IS SHOWING DECREASING PRODUCTION. Mexico, China, Australia are much more important producers and they are increasing output. Peru also is stable so the graph is showing a trend that is limited only to the US THE SOURCE OF ONLY 5% OF WORLD PRODUCTION.

    The problem with the argument that has ensued is the premise. comex isn't capable of taking on the losses or delivering the non existent asset that it has been selling. In the extreme case comex will give up what it has and people left with paper promises will have to face reality. Silver coins accounted for just 10% of total silver demand in 2010 double jewelry so investment demand outside of comex (physical demand incl ETF's) isn't going to drive the price up infinitely. The problem at comex will have to sort itself out but don't bank on it having a singularity effect on spot price.

    BUT say the price hits $150 and stays there for a period of time. Mining companies will HEDGE at a RECORD HIGH PRICE and that will ATTRACT INVESTMENT from financial institutions. $20M for a mine shaft will be peanuts compared to the credit banks will be throwing at them. Approval process? How hard is that going to be in this economy? Quebec had no problem thowing a couple hundred people off their land to get Malartic started. Detour Lake project offers aboriginals job prospect and it gets approved. There are many other smaller projects that have the green light but are idle because the price doesn't justify the exploration costs.

    With respect to construction time. Ivanhoe needed 3/4 of a year to complete 70% construction at one of the world's biggest copper gold projects. Malartic less than 2 years but it began when gold was a lot lower, as the price moved up delays were compensated for more rapidly. Price affects both the speed and efficiency with which many of the new projects reach commercial production.

    That silver mined as a by product to gold HELPS prove my point. $12000 gold is a major driving factor. Companies could begin DRILLING DEEPER INTO THE EARTH WHERE GOLD IS NOT UNCOMMON.

    "Most primary silver mines have already been operating at full-capacity at these prices"
    In response to frdm45, what price? $30? if the price is $30 yeah there isn't much incentive for primary silver producers to expand operations but we're not talking about $30 silver are we? It's the primary gold producers that are operating at higher capacity because gold is much closer to its 2011 high as evidenced by the gold to silver ratio (even gold to platinum ratio). $10-$20 dollar margins going to $100 dollar margins is a big increase especially in percentage terms. How much of Silver Standards billion ounces of indicated resource will convert to 2P reserves? (currently only 290M ounces). The $20 or so base cash costs at some of the mines will go from being significant to insignificant. Most of the silver producers have many times more resource than 2P. The fact that companies like Harmony Gold and AngloGold Ashanti are still around is a testament to the price of gold, they would have disappeared if the price was what it was only years ago, their cash costs would've just covered the price only five years ago.
    Consider cash cost, the relatively low cost gold producers like Barrick (60-70%), Goldcorp (60-70%), Agnico (60%) have well over half of their gold resource already represented as 2P reserves. For primary silver it's completely different. 22% for silver standard (300 of over 1B), 40% for Hecla, 46% Coer D'Alene, 35% for First Majestic. Much more growth for silver than gold producers when it comes to the amount recoverable. $20M shaft cost is nothing when the value of the silver goes from $100M to $700M (hedge at $100, increase reserves).

    Right now the only limiting factor to Canada's biggest gold-silver-copper project KSM is the construction cost of almost $5B. How fast will that barrier be removed if its silver and gold reserves go from a valuation in the billions to 1/2 trillion dollars? because reserves go up by tens of millions of ounces for gold, hundreds of millions for silver and the price by magnitudes. KSM mine life could be 50 years and construction is only limited by $5B which is peanuts at $10th gold, $100 silver.
    so yes at $100 silver $12000 gold many new mines will open ESPECIALLY IN EUROPE where Eldorado Gold will become the biggest gold producer (also biggest international producer in China).
    Jan 29, 2012. 01:20 AM | 2 Likes Like |Link to Comment
  • The Silver Singularity Is Near [View article]
    For the long term the biggest factor acting against silver is the sheer number of alternatives, many of which should also be considered investment grade commodities. The platinum group metals (reserves can increase but they require higher prices are inevitable given strong demand from the auto industry), rare earth metals (used in renewables, China quota on exports), lithium (electric cars, rechargeable laptop batteries).
    Jan 28, 2012. 05:55 PM | Likes Like |Link to Comment
  • The Silver Singularity Is Near [View article]
    It takes time to construct the mines but not nearly as long for mines already operating. Companies mining two million ounces a day can double production easily if their profit margin quadrupled.
    Like I already pointed out though, there are lots of NEW gold and silver mines reaching commercial production within the next two years regardless of what happens with the price.

    ALSO to remember is that very few companies still have hedge books meaning that they can IMMEDIATELY capitalize on the higher prices. That will allow them to respond more quickly to the higher prices by expanding operations to include lower grade ore.

    "will not therefore invest scarce resources"..."if they do not have confidence that prices can be maintained to justify investment and capital costs"
    Silver is barely $30 an ounce today and they ARE investing to bring mines online because their INVESTORS are bullish on gold and silver. What do you think they'll do when silver reaches $150 an ounce? of course they're going to invest scare resources to bring MANY new mines online. At $200 they'll START TO HEDGE again, opening up their hedge books and selling at $120 an ounce for the next five years. Primary production will grow very fast in that scenario. When it becomes apparent that comex is the problem their investors will shift to physical silver and that will mean silver coins will go from 10% to 30% or more of demand.
    Jan 28, 2012. 05:42 PM | 2 Likes Like |Link to Comment
  • The Silver Singularity Is Near [View article]
    It has been a while since photography and silverware have been factors in demand. If their demand reaches zero that won't change the demand drivers.

    The biggest industrial demand growth for silver will be from solar and rfid technology.
    Jan 27, 2012. 11:11 PM | 2 Likes Like |Link to Comment
  • The Silver Singularity Is Near [View article]
    Agree that the price of silver is going to get higher but not that's it's going into a singularity. Higher prices will cause many new mines to start construction. Goldcorps Penasquito has over a billion ounces of silver reserves that just started producing, Canada's biggest gold and silver project KSM, if the price increases KSM reserves of silver and gold could go up exponentially because very low grade ore will be economically viable to mine. Cadia Hill Newcrest Mining, Olympic Dam is relatively new, half of Yamana Gold's reserves are at mines that will open in the next two years, Aurico Gold most of reserves are at mines that are still projects, Pretium Resources can't even open its mine because it can't raise the billions needed for construction. At $70 silver the number of new mines that will open would double or triple. Even Osisko Mining said that the 50% or so increase in some of its measured and indicated reserves last year was due entirely to the higher commodity prices. If silver reaches $200 an ounce how many buyers will there be ? most people can't afford to buy it at that price but there will be many more sellers.
    Another thing that will cap the price of silver is the fact that there are alternative precious metals that have in the past been ignored by investors. Silver is produced at a rate 10X gold and 100X platinum and palladium which have a better growth in industrial demand due to more vehicles being manufactured (39% more in 2016 than in 2010).
    A temporary spike in the price will probably be caused by the futures market crashing. But how long will that last? if all of the silver is held by a couple billionaires then they will cash in at $500 an ounce or they will be forced to sell by the government leading to more regulation in how paper futures treat the commodity.
    Palladium, Platinum, Rhodium also have iso currency codes. Considering their very low production and that almost none of their demand is by investors, they are much more attractively priced.
    Remember the Rhodium crash in 2008 ? Silver leads precious metals in supply and production. When one like gold or platinum reaches $20,000 an ounce something in the market will act to lower the price. That puts a cap on the price of silver too because investors will consider its technical merits like the gold silver and gold platinum ratios.
    Following the record high and the subsequent crash, when the dust settles price will be driven by supply and demand and there's more than enough silver to go around. Silver's largest producers in 2010 were not even gold or silver companies. Diversified metal companies like BHP. In fact many of the producers take silver for granted, that's why companies like Silver Wheaton exist ($4 an ounce is what it pays the miners for silver). At $70 companies will put a lot more emphasis on silver exploration then they currently do.
    Jan 27, 2012. 10:38 PM | 4 Likes Like |Link to Comment
  • The Keystone XL Pipeline Has A Good Chance Of Eventually Being Approved, Here's Why [View article]
    That's only direct jobs. Indirect jobs bring the total up to 20,000. That's what TransCanada promises and that's even what some democratic lawmakers have suggested
    The pipeline to Texas increases throughput (access) for all refineries in the area even the US based ones (Conoco is headquartered in Houston). Oil production in the U.S. may be growing but the country still imports A LOT of oil and a lot of it comes from OPEC which controls the price through caps on its crude prod (roughly 80% of its light oil output). When Mexico completely runs out of reserves (could be as low as 10 yrs) where is the US going to get that extra 2 or so million bpd? Venezuela? no because their reserves are in extra heavy oil like Alberta's. Mexico's Cantarell field which the country used to rely on for its oil is producing at 15 year low levels.
    The UN has already called America's use of corn biofuel a threat to food security. Access to cheap energy is one of the reason China is doing so well. (off topic) electricity prod est cost per kWh: Coal 4c, N.Gas 9c, Renewables 23c.
    Not all of the refined product is exported. If there's ever a need for more oil the U.S. could easily offer the companies incentives to convince them to keep more of it here. US refineries give Americans job opportunities. If throughput falls and they lower capacity American jobs are lost.
    Jan 25, 2012. 07:43 PM | Likes Like |Link to Comment
  • It's Official: Mr. Market Believes Apple's Growth Story Is Over [View article]
    Noticed you didn't mention Nokia p/e 23.06. No company lost market share faster in Europe than Nokia. Maybe Brazil and Russia too where the transition away from Symbian isn't helping.
    When talking about blackberry make sure to mention U.S. market share not just market share since blackberry continues to hold steady in Europe and is gaining ground in developing countries where bandwidth efficiency matters.
    Apple is gaining in the U.K., Australia, China and losing in Western Europe. The iPad probably won't have 90% of the market next year but if the tablet market is 40% bigger Apple could grow just on its tablets. iPhones are still doing well overall. Just make sure they're easy to distinguish from the fake ones being sold in China.
    Jan 25, 2012. 09:09 AM | Likes Like |Link to Comment
  • The Keystone XL Pipeline Has A Good Chance Of Eventually Being Approved, Here's Why [View article]
    Albertans needn't get discouraged. Remember that nearly everyone in the state of Texas where the oil would go, fully supports the project and have no problem with Alberta's oil. The people against using oil from the tar sands don't seem to understand that in 20-30 years almost all of the oil left to use will be heavy, 'dirty' oil. EU just put an oil embargo on Iran and the EU normally buys 20% of Iran's oil exports. That happened with oil nearing $100/bbl which means that the price will probably rise even higher. Considering OPEC now relies heavily on Venezuela (I think it's now recognized as tops in reserves among opec nations) and Venezuela is one of Iran's best friends, things could get worse (opec already put a cap on crude output. if they want the price higher they could lower the cap).
    Jan 24, 2012. 04:19 PM | 1 Like Like |Link to Comment
  • 5 Things RIM's New CEO Absolutely Must Not Do [View article]
    A couple big things wrong with RIM but that can be fixed.
    Top 3 US Carriers keep refusing to market the Playbook. When they do expect sales and market share to pick up. The problem is that their reasons for not carrying it are sketchy. The tablet market is going to grow very quickly over the next two years so RIM has to get companies like Sprint to embrace the playbook.
    BB10 late release will only affect US market share. To avoid severe fall in U.S. market share RIM has to get something QNX related for phones out by the third quarter of 2012.
    Jan 24, 2012. 07:51 AM | Likes Like |Link to Comment
  • 5 Things RIM's New CEO Absolutely Must Not Do [View article]
    "Google launches Ice Cream Sandwich and Apple releases Siri and the iPhone 4S. And what do you know? RIM’s market share tanks to half of what it was. " RIM did release new phones the sales of which were healthy and are the main reason unit sales increased in the last quarter so RIM didn't just sit by and do nothing. Blackberry's got the main apps which is what most people use 90% of the time. Within a year whichever company has the most apps won't matter because every company will make it possible to access them across platforms. BlackBerry OS is known for its security (first tablet endorsed by the US federal government is the BlackBerry Playbook) and bandwidth efficiency two things that are very important to people in developing countries and the middle east and the corporate world which is why RIM continues to have strong results there.
    Jan 24, 2012. 07:24 AM | Likes Like |Link to Comment
  • AuRico Gold: Another Safe Mining Stock To Buy [View article]
    Cash cost problems are El Cubo ($1046/oz, shutdown for most of 2010 due to problems with workers) and Stawell/Fosterville ($863 mine deplete by 2Q 2012) not really Ocampo which accounts for 72% of production at least for the year ($415/oz realized).
    The best news the company has going right now is that Young Davidson is 79% complete. Young Davidson will produce 180th annually for 15 years at a long term cash costs of $400/oz
    Jan 23, 2012. 07:39 AM | Likes Like |Link to Comment
  • AuRico Gold: Another Safe Mining Stock To Buy [View article]
    Most of AURico's operations are projects nearing the production phase even moreso after acquiring Northgate Minerals. How can someone be concerned about a cash cost of $680/oz for a company at that stage? The spot price is stuck above $1600/oz. Check the costs at the largest mines and you'll see there's nothing to be concerned about with regards to cash costs. There's also silver by product that's in the millions. Production is on track to double within a couple years.
    Should have included the risk of a shutdown at El Cubo. That was a big reason the company lost value in 2010.
    You also talked about wanting gold companies paying dividends. Aurico doesn't pay dividends.
    Jan 23, 2012. 06:21 AM | Likes Like |Link to Comment
  • Is China Now Number One? [View article]
    People are making this more complicated than it has to be. China is bigger in some ways but not yet in economic size. When salaries are 5-10 times higher in the USA than China haircuts and other services will be more expensive because people have more money to spend (not many people can afford to live in Hong Kong but is anyone questioning their gdp?). Downplaying the effect that has on gdp undermines the definition of gdp, it's like questioning whether a company selling 10,000 goods at 10 cents a piece is really larger than a company selling 10 goods at $100 a piece. The world still relies on the American consumer market (why the USA is still the number one export destination for many countries) which is the main reason China would rather the US economy not completely collapse. The USA still leads the world in innovation (patents) a lot of that is because of medical discoveries financed by the large amount of healthcare spending. Rich countries like Germany rely on US companies like Alexion Pharmaceuticals for help (e coli outbreak).

    Nominal gdp is the most accurate way to measure the size of an economy. However since the top 10 countries have traditionally also been developed countries that method might not carry as much weight when developing countries reach the top of the list because, until those countries reach a certain per capita level ($15,000) the governments could be more limited in what they can do.
    Jan 17, 2012. 03:46 AM | Likes Like |Link to Comment