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Gold: Is Now the Time to Buy?

Jeff;
Thank your for your reasoned response. No real disagreement as we did see the silver annual deficit diminish (or disappear) in 07 and 08 as base metal production was pushed to the maximum. I do question your comment that base metal miners can/will become silver miners. From the figures I have found it seems that most lead/zinc mines end up with a high recovery of silver in the lead concentrate. I doubt if the refineries put out much pure lead with a silver "contaminate". Gold mines have by the nature of similar concentration characteristics a good silver recovery. I have seen few zinc mines with a silver content greater than 1 ounce per ton, hardly sufficient to substantiate a mining venture without a strong zinc price. Cannington would of course be the monster exception. So, until I learn more about these polymetalic (sp) mines I think the question is still up in the air as to how much production response we can expect from these low grade silver miners. And yes, I know you have written of both the 8 to 1 ratio and base mine component in the past. That is why I consider you one of the best in this field. Thanks

Gold: Is Now the Time to Buy?

Jeff;
Thanks for another excellent article..tile not withstanding :) I appreciated your discussion on the “downside insurance” aspect of silver. One leg of the silver stool I think you missed is the inelastic supply train for silver. Mined silver production only amounts to 8 ounces for each ounce of gold. Even then, 70 plus percent of that silver can be attributed to mines supplying it as a bi-product. There is virtually no readily available "ready to go" production that can be brought on line as prices rise. Sure, there are a number of mines moving to production and they could be hurried, but in actuality they are merely drops in the bucket compared to the bulk of silver coming from base metal mines strapped to the demand of their prime product. There is clearly justification to speculate that silver could move up to a 10 to 1 price ratio with gold as silver gains an equal "money status" with its historical companion. The silver miners at this point seem to offer the chance of a lifetime for the common man to gain and preserve wealth. Keep up the good work.

Wary of the New Gold Rush

The comments on this article make an otherwise "bunch of hunches" an extremely worthwhile read. I wish the author luck in his next attempt to diss the gold market. As some here have already recommended, a good study of the history of money and gold would really help.

Remember $20 Oil? Looks Like It's Coming Back

Kalpa_ Your response makes no sense. William points out that 100 million barrels only amounts to about a day's world consumption. Your quote used "storage capacity limits" so you were not speaking of anything that compounds. Actually, I think your estimation of world storage capacity is off the mark (way too low) but the point is you just don't seem to grasp the fact that only when we have a surplus daily production capacity measured in the area of 5 million barrels will there be downward pressrure to prices below the cost to extract from most newly developed new sources.

Which Metal Miners Will Outperform in 2010?

Hyper_ I might add to this discussion in case anyone is still looking at it. The annual production per share is not a stand alone figure. It only has meaning when viewed in relation to share price. In that case AEM is very expensive right now and pending the share price when 2 million ounce production is reached it may still be very expensive. Note; I like AEM very much but it is just too costly for me to own right now. One has to give it a huge premium for "safe" mine locations and great management to justify the price.

Which Metal Miners Will Outperform in 2010?

Hyper_ If you were not using ounce per share, why did you say this: " Production Per Share: In 2008, Agnico sported a minuscule 1.9oz per share. Don't be sad! This will increase over 350% by 2010 to 7.15oz/share!"???

By the way, with 145 million shares out and your projected 2 million ounce annual "production", that equates to 0.014 ounces per share. Does that help?

On Jul 09 01:30 AM Hyperinflation wrote:

> Yes I did, .128 oz per share ( or 7.81/100) will achieved by 2012.
> They high quality of their mines will likely lead further annual
> production growth thereafter. They have been adding proven reserves
> at a very fast pacing over the past few years. i wasn't using oz
> per share in the article, I was referring to total production. I
> meant was that when they reach 2m oz of production per year, that
> will then give them one of the highest production per share ratio
> in the complex. Does that help?

Which Metal Miners Will Outperform in 2010?

Hyper_ Yes I am familiar with the growth pattern for Agnico. What I am not familiar with is substituting "production per 1,000 shares" for "production per share". Did you read my post?

Which Metal Miners Will Outperform in 2010?

Hyper_ Either you use a way of judging ounces per share production or you are way off in your caluculations;

"Production Per Share: In 2008, Agnico sported a minuscule 1.9oz per share."

With 156 million shares, AEM would have needed to produce nearly 300 million ounces to have 1.9oz per share. We know the annual world production of gold is only about 80 million ounces. You might be closer in saying the they produce about 1/300th of an ounce per share. This compares with..for example, DROOY which will produce close to 1/100 of an ounce next year per share (at one fifth the current share price). Sorry if I don't understand your methodology.

Competitive Devaluations to Spur Gold- Richard Russell

Dr. Realist. One could read into your comment: "...hundreds of inovations and billions in capital investment it take on average about 20 man hours or (woman hours if you prefer) to extract an ounce of gold on average.", that you are suggesting it is a waste of resources to chase after gold. Not concluding that was your point, I want to make sure everyone understands that most gold mined comes either as a prime product with a base metal component or from a base metal mine with a gold bi-product. Without a high price for gold, there would a loss of base metal production at many marginal mines (especially copper mines), which in turn would result in more mining and higher prices for those commodities.

The Death of Gold?

I have a couple of bones to pick with the article. First, the comment: "This is the 1980 spike revisited, but at a much higher inflation adjusted price. How high? There are as many guesses as their are commentators - $2200, $5000 or more? This is the end game that many goldbugs have been waiting for, when they can shout "we won"!"

Let me point out that gold was priced at about $40/oz in 1960. It rose in bumps and bounces to a blowout spike of $800/oz...and then "crashed" to average about $400. for two decades. A factor of 20x to the peak and a retreat to 10x. I suggest that a burst from $500 times twenty would put that 1980s blowout look like $10,000/oz today. A 50% retrenchment would take us back to $5,000/oz. This my friends shows that periodic readjustments take place relative to gold and the denominated fiat currency.

The second issue is this old mantra of "gold pays no interest". What kind of logic is that? Microsoft has paid no interest and only one surprise dividend last year(?) over it's exciting (and profitable) lifetime. The value of the shares (think ounces) was and is supported by the underlying value of the company assets. Why is it so hard to grasp the possibility/fact that gold's underlying value has and will increase because it is simply worth more in the denominated currency. The currency is/will buy less essential goods as time goes by and the amount of new gold grows at a significant lower percentage rate than the the world population and commercial monetary needs. I think this "volatility" crash theory is fools grasping at a straw.

Coeur d'Alene Mines: Some Risk, But Big Reward Is Possible

About 90% of the complaints I see about Coeur come from people who invested in the company when the share price was above $4.00 pre-reverse split. What they seem to not realize is that those prices were based on the "silver story" that indicated we should see moves up into the $50. level for silver. Those dreams didn't come true in 04, 05, 06 and by the time 07 rolled around it was apparent that bringing new mines on line was both difficult and expensive. Then, there was the credit crunch that slammed every body in need of financing (like new mines). This is a good article and those with a clean slate reading it should pay attention to the opportunity this company offers. Bad management does not bring on new mines and project a future company growth which is the envoy of the mining community.

Is COMEX Running Out of Gold?

BK_ Everybody? knows that only the registered gold is available to cover "delivery" calls. Who knows the ownership and or intentions of the gold in the eligible classification? The registered gold seems at the low end of the chart and trending down.

The Bullish Case for Silver

Ms. Crigger_ I suspect you did a good job of quoting Mr. Morgan but you should have had him critique your enitre article as it relates to silver miners. Silver Wheaton is NOT a miner as was pointed out in an earlier comment, but they do not own one as was suggested. SLW simply holds contracts for silver mined by others and shares in their risk of staying in production. Silver Standard (SSRI) is a holder of vast silver reserves as you say but they have one very world class silver mine and another on on the way (as was their plan all the way along). You are correct in assessing Pan American (PAAS) as a world leading pure silver miner but while addressing the English speaking audience it is a glaring error to omit Coeur d'Alene Mines (CDE). They are currently producing the same as PAAS (20 million oz/yr) and ares a little "purer" striving to have gold as the only bi-product, rather than base metals as it the case with all others.

As far as the Captain's comment about about his 18 year investment observations, he chose the wrong time frame. During the late 1970's and early 1980s when we had the silver price blow off (up from under $1.29/oz up to the $50/oz mentioned) there were several billion ounces of "junk" silver put into the inventory. That enormous stockpile was worked off until 2001 when it appeared to be substantially used up. For the last eight years the silver price increase has substantially out preformed the Capt's money markets. He chose the wrong time period for an honest comparison. Starting right now he would get it right if he bailed out of those "safe" investments and got himself a batch of the shinny metal.

USGS' Curious Silver Numbers

Three or so years ago an old time analyst covering silver retired. Since then the new guy hasn't seemingly done any research. It used to be noted that the silver reserve figures were based on the economics of base metals and were not stand alone figures. I recall that is the basis for current estimates.