3 Reasons To Consider Pan American Silver [View article]
Sammy_ All three of your strategic alternatives appear to me as following the script of buying high and selling low. Why in the world would a company making money had over fist having followed the idea that silver has been under valued for a decade decide to bale out when silver is suffering a temporary funk?
What It Really Costs To Mine Silver: The Coeur D'Alene Mines Edition [View article]
Hebba_ You ask: "Doesn't that tell you that their costs are much higher than their reported cash costs? "
What it tells me is that you are using GAAP generated earnings as a bench mark when every expert I read states for mining Cash Flow is a far more accurate metric. You will find Coeur's cash flow has been very robust over the last two years.
What It Really Costs To Mine Silver: The Coeur D'Alene Mines Edition [View article]
Slam_ You are right in pointing out that Coeur has not included Kensington's Au production and costs as a bi-product in their silver all in costs. Had they done this (as the author has seemingly done) it would have slewed the silver production cost number higher as that mine lost money during the long start-up period. Kensington is a complex underground mine and was perhaps rushed into service. However, it is projected to make a solid profit this year and going forward. I think many would would complain if Coeur were to change accounting methodology at this time and by doing so, low ball their true cost of mining silver. PS, I liked your tungsten mine example. I don't think BHP Billiton uses their base metal and coal empire mining costs to come up with the all in costs for mining silver at Cannington, the on and off largest silver producing mine in the world.
In my opinion Hebbba's snap shot approach leading to conclusions that only apply in a rear view sense fail to be of much value if using them as an investment tool. I think it is much more valuable to fall back on the true fundamentals of how much it will likely cost to mine an estimated amount of silver and/or gold selling at an estimated price IN THE FUTURE. In the case of Kensington with a projected 100,000 annual ounces at a cost on mining Au in the $900-$950 range, it should be a solid money maker even adjusted to reflect the added Hebba all in cost factors. Even if Au prices don't attain the expected higher levels. I agree with your assessment that Palmarejo and San Bartolome' seem to be on track to provide robust earnings with or without an expected silver sale price. Of course, it wouldn't be mining if all was known concerning the future.
Hebba_ I know you have repeatedly pointed out that your calculations are only part of sound decision making, and that is good. But your use of verb tense throughout suggests they do have significant value for judging future outcomes. I don't think that is true in the case of Coeur when so much (like all) of their production has been under construction/re-constr... over the last four years.
One last comment. Looking at your table of Coeur's cost of production and glancing at the price of silver over the last couple of years, I am at a loss to understand how the company could have generated so much cash that was used to pay down debt, finance construction, maintain a large exploration effort, buy into a bunch of upstart silver mining companies, and still have a healthy cash balance. Where did all that money come from when your figures would indicate they were mining without any profit? It must be that you figure them into the cost of mining silver but shouldn't there be some off set for the value added?
Bruce_ Thanks for following through with your promise to cover DRD. Again, you have done a masterful job of researching your subject matter. The DRD Home page does an above average job of describing their operation and I recommend investors give it a look.
Since you wrote your earlier article on the significance of tailing deposits in terms of total world resources, I see that Coeur d'Alene Mines has laid out plans to reprocess the waste piles at their venerable Rochester Mine in Nevada. I expect other miners will follow this business plan but as you pointed out it requires a special type of expertise and locational availabilities. In the mean time, as a DRD shareholder, I hope to see the company share price more accurately reflect anticipated earnings.
What It Really Costs To Mine Silver: The Hecla Mining Edition [View article]
Nuclear_ Please be more specific. I have been lead to believe that Hecla mines large blocks of ore and this was indeed the problem that lead to one of the deaths in the mine. The mining face was so wide (and deap) that as they were backing out of one of them, taking out support pillars as they did so, and the pressure caused a rock fall. You seem to speak with some authority on this matter so I would appreciate a more complete explanation of what you consider narrow veins. For reference, I have in mind a narrow vain to be in the one meter by one meter and smaller with no large swelling "clavos" to be "narrow". Thanks in advance.
What It Really Costs To Mine Silver: The Hecla Mining Edition [View article]
JB_ The Superfund designation took place in the 80s and Hecla was named as a responsible party at the on-set of that action. The only question was what the cleanup would look like, how much it would cost and what proportion Hecla (and others) would pay. I have to question your assertion that the Hecla IR told you the company had no obligations forthcoming. I suspect you asked the question in a way that the IR person thought you were asking for specifics. Those were not known until mid-2011 when all parties agreed to the cost allocation formula and the "deal" was approved by a federal judge.
What It Really Costs To Mine Silver: The Hecla Mining Edition [View article]
Hebba_ Well enough that you say: " My goal is simply to analyze their costs and how much it takes to produce each ounce of silver.", but your analysis is not representative of the costs that were achieved in years previous to 2012, nor are they representative of costs that should be expected for 2013 and forward. What value is it to pull one isolated time period out of years of data and seemingly present it as a guide to decision making for the future when in Hecla's case, costs for 2012 are clearly an anomaly? It is obvious to me that your approach has value if applied across a reasonable time period or used to analyze a company during a period of stability. For Hecla with only two operating mines, it is a totally flawed when applied to a period when one of those mines is not only non-productive but requiring huge maintenance and reconstruction expenses. I do look forward to your future analysis of companies as your approach is challenging and provocative. And, you write very well.
What It Really Costs To Mine Silver: The Hecla Mining Edition [View article]
JB_ In several of your posts you have stated that Friday has a low silver grade and narrow vein geology. A quick search for "Hecla Lucky Friday ore grade" yielded this comment from Hecla:
"The development of a new #4 Shaft and related infrastructure at Lucky Friday, when completed, would increase annual silver production from current levels of approximately 3 million ounces to 5 million ounces, with an expected average total cash cost of less than $4.00* per ounce of silver in the first five years of operation. The two key drivers for this potential increase of silver production are: 1) ore grade is expected to increase from the current grade of 10.4 ounces of silver per ton to over 14 ounces of silver per ton (a corresponding increase in lead ore grade is also expected); and 2) mill throughput of ore is expected to increase from approximately 350 thousand tons to 375 thousand tons annually."
The Silver Doctors did a writeup late last year on silver ore grades and discussed the largest silver producers ore grade. They put the big guy, BHP Billiton's Cannington mine as having an ore grade less than 400 grams/tonne (13 ounces). They give Fresnillo's multiple mines as averaging 10.6 ounces per tonne and Pan American's mines containing 4.7 oz/tonnes. As far as your contention that Friday is a narrow vain structure, I can only suggest you spend some time studying the Hecla web site. The photos of the mine tell a different story. In fact, the Silver Valley is noted for not only rich silver grades, but also and huge ore bodies. If the projected grade of 14 ounces pans out, The Friday will be one of a select group of ore bodies containing over 10 ounces per tonne.
Please justify your continued repeat of your seemingly incorrect assumptions or stop making them. Thanks
What It Really Costs To Mine Silver: The Hecla Mining Edition [View article]
Hebba_ I appreciate your effort to bring clarity to the question of how to judge the true cost of mining PMs. However, I think your system falls short when applied to Hecla. In particular is seems odd that you calculate a close to non-profit performance for HL when looking at on look at 2011/2011 years and seem to extrapolate it into the future. That is strange given that HL had $267 million in the bank mid-2011 AFTER paying $167 million to the EPA Super Fund settlement agreement. How does a not for profit company amass that kind of cash hoard? Unless, the year long shutdown of Lucky Friday skewed the trend significantly. You acknowledged this event with this comment: " The mine was closed for safety reasons, and according to the company should be reopened for 2013 -- so investors should not be worried about the drop in production." It seems to me that you should have also said that this one-off event which concluded with having completed a generational upgrade, resulted in an anomalous spike in the cost per ounce of silver mined.
I looked for guidance in your linked article centering on Gold Corp. You said: "Simply put, it is all costs related to running existing operations with the goal of never expanding reserves, or making any discoveries on new or existing properties. We do not feel like this is an accurate measure because any mining company NEEDS to expand or maintain its reserves to survive, which is a very real cost of doing business in the mining industry. Companies should not report the costs it takes to sustain a mine, but rather the costs it takes to sustain a mining company."
If I read that right, you are saying that in Hecla's case, the upgrades at Friday are just a normal business (sustaining a mining company) issue. It wasn't that of course, they modernized the ancient access shaft that opens the gate to a huge reserve that is calculated to provide 30 years of increase silver production.
I think we can look forward to much lower cost per ounce figures for this year and years forward. If so, your conclusion that Hecla is a (perennial?) high cost producer chases people away from this great company, you have not done them a service...in my opinion.
Agbug_From the Wheaton Home: "Barrick has provided Silver Wheaton with a completion guarantee, requiring them to complete Pascua-Lama to at least 75% of design capacity by December 31, 2015. During 2014 and 2015, Silver Wheaton will be entitled to the silver production from the Lagunas Norte, Pierina and Veladero mines to the extent of any production shortfall at Pascua-Lama, until Barrick satisfies the completion guarantee. If Barrick fails to satisfy the requirements of the completion guarantee, the agreement may be terminated by Silver Wheaton. In such an event, Silver Wheaton would be entitled to the return of the upfront cash consideration of US$625 million less a credit for silver delivered up to the date of that event."
There is no mention (that I see) of Barrick needing to buy silver to deliver to SLW. Obviously, if they did have to buy it, Wheaton would just turn around and sell it with no change in silver supply and demand. I am aware that some analysts have speculated that Barrick would need to buy silver on the open market if the mine isn't built. They appear to be wrong.
Hecla Mining - Shareholders Overreact As Company Makes A Bid For Aurizon [View article]
Quix_ You are right in correcting my off the cuff remark. A quick look at OSHA figures for fatalities in the transport and warehousing sector (closest I could find for the USPS), I see ~14 deaths per 100,000 employees annually. Adjusting fullt-time employment to million man hours, it looks like Hecla could only have 0.6 deaths per 8.5 million man hours to match the postal type rate. It is important to note however that the workplace death rate has gone down significantly in the 25 year benchmark that Hecla operated though.
I agree with your comment concerning MSHA needing to do something. I further believe (with no information to back it up) that Hecla quietly supported the shutdown order. They have been handicapped with that old crowded shaft and it really needed to be modernized...a project that even without MSHA oversite would have taken much of a year. In these days of finicky shareholders and algos ready to rip share prices apart on any decisions made that might mean temporary slow downs, it is near impossible for companies to do major maintenance and/or upgrades. I am pleased that the project got done.
They said Greens Creek was too big a bite for Hecla to take on by themselves. It looks like twice the mine that it was under Rio management. Lets go get some gold to backup the silver!!!
Hecla Mining - Shareholders Overreact As Company Makes A Bid For Aurizon [View article]
TV Investor_ Great analysis of the situation. As an investor I would have liked to seen a little more on why the 2012 Hecla earnings report was an anomaly and should not be viewed as a trend. Losing that full year of production and incurring large maintenance/upgrade costs at Lucky Friday was a one-off deal. In fact, the "new Friday" looks to be a great improvement. Much has been made of the two fatalities in 2011 which spurred the year long shutdown, but considering they (two separate accidents) were the first fatalities in 25 years and 8.5 million man-hours of work in the mine, there is little reason to believe Hecla disregards safety. Heck, I am not sure the post office can operate with a better safety record. Also, during the year Hecla encountered ore grade problems at their Green Creek mine. That resulted in higher silver equivalent cost per ounce figures (still and industry low) and fewer ounces mined but that problem appears to have been overcome.
On Buying Silver Because Of The Gold To Silver Ratio [View article]
paulo_Sorry to pick on you.. but you people keep saying gold produces no return and other words to the same effect, but you seem to not want to admit it is money. I know a number of people who buy new cars every year. Are they speculating? Is their purchase designed to preserve wealth? Of course it isn't either of the two but people buy them anyway. When I ask them why they sell a near new,perfectly functioning vehicle that has almost all the amenities of their new purchase at such a high cost, they say in various ways that it is a form of insurance and prestige. Gold seems to satisfy those same goals for many people/governments. Back when Brown was dumping gold at a dirt cheap price even for that time, there were people lined up to buy it at the bargain price. That was when speculative interest was at an all time low. Accept it, people will want to buy gold (and silver) as a mater of insurance and prestige forever. With that demand and their inherent stable character, the metals will become increasingly viewed as a unit of trade in this financially troubled world. In other words they will become more solidified as money. Perhaps the money of choice.
On Buying Silver Because Of The Gold To Silver Ratio [View article]
dnpv_ You ask a good question. The author has chosen to use the least amount of gold in the earth crust than the many professional authorities who have provided such analysis. His choice may or may not be the best but a search indicates that others with equally impressive qualifications provide a much lower G/S crust ratio. A ratio of 25 ounces for every ounce of gold would appear to be a good average of all the numbers available. As has been noted elsewhere in this comment section, it is really not a mater of the ratio in the whole of things but how much of each metal is available in such concentration and geological setting to allow economical removal and processing. Silver does not appear to me to be 60 times less difficult to mine than does gold. Indeed, to meet the demand is seems to me the price of silver needs to go up... regardless what gold does.
Hecla 17% Undervalued, But This Peer Will Soar [View article]
Former HL_You say: "This company has been involved in what they refer to as "negotiations" with the US EPA concerning the Coeur d' Alene basin in northern Idaho." and: "Now the US EPA is looking at other sites where HL may have potential liability."
While it might be true that there are other potential liabilities for past operations out of the "Valley", they would be a speck relative to the huge Silver Valley Super Fund site:
"In 1983, the U.S. Environmental Protection Agency listed a 21-square mile mining area in northern Idaho as a Superfund site under CERCLA. EPA extended those boundaries in 1998 to include areas throughout the 1,500-square mile area of the Coeur d'Alene River basin project area. Under Superfund, EPA has developed a plan to clean up the contaminated area."
Be clear that CERCLA agreements are final. You are in error indicating there is still unsettled Silver Valley issues regarding Hecla and the EPA. It is a tenant of CERCA to wrap the entire cleanup action into one remediation plan and apportion costs to those who contributed to pollution. The judge has ruled on the settlement proposal for the "Valley" and Hecla has paid their share. End of story.
By the way, have you looked at all the other silver miner share prices: " In a little over a year ago" ? None have fared well.
3 Reasons To Consider Pan American Silver [View article]
What It Really Costs To Mine Silver: The Coeur D'Alene Mines Edition [View article]
What it tells me is that you are using GAAP generated earnings as a bench mark when every expert I read states for mining Cash Flow is a far more accurate metric. You will find Coeur's cash flow has been very robust over the last two years.
What It Really Costs To Mine Silver: The Coeur D'Alene Mines Edition [View article]
In my opinion Hebbba's snap shot approach leading to conclusions that only apply in a rear view sense fail to be of much value if using them as an investment tool. I think it is much more valuable to fall back on the true fundamentals of how much it will likely cost to mine an estimated amount of silver and/or gold selling at an estimated price IN THE FUTURE. In the case of Kensington with a projected 100,000 annual ounces at a cost on mining Au in the $900-$950 range, it should be a solid money maker even adjusted to reflect the added Hebba all in cost factors. Even if Au prices don't attain the expected higher levels. I agree with your assessment that Palmarejo and San Bartolome' seem to be on track to provide robust earnings with or without an expected silver sale price. Of course, it wouldn't be mining if all was known concerning the future.
Hebba_ I know you have repeatedly pointed out that your calculations are only part of sound decision making, and that is good. But your use of verb tense throughout suggests they do have significant value for judging future outcomes. I don't think that is true in the case of Coeur when so much (like all) of their production has been under construction/re-constr... over the last four years.
One last comment. Looking at your table of Coeur's cost of production and glancing at the price of silver over the last couple of years, I am at a loss to understand how the company could have generated so much cash that was used to pay down debt, finance construction, maintain a large exploration effort, buy into a bunch of upstart silver mining companies, and still have a healthy cash balance. Where did all that money come from when your figures would indicate they were mining without any profit? It must be that you figure them into the cost of mining silver but shouldn't there be some off set for the value added?
The World's First Gold Factory [View article]
Since you wrote your earlier article on the significance of tailing deposits in terms of total world resources, I see that Coeur d'Alene Mines has laid out plans to reprocess the waste piles at their venerable Rochester Mine in Nevada. I expect other miners will follow this business plan but as you pointed out it requires a special type of expertise and locational availabilities. In the mean time, as a DRD shareholder, I hope to see the company share price more accurately reflect anticipated earnings.
What It Really Costs To Mine Silver: The Hecla Mining Edition [View article]
What It Really Costs To Mine Silver: The Hecla Mining Edition [View article]
What It Really Costs To Mine Silver: The Hecla Mining Edition [View article]
What It Really Costs To Mine Silver: The Hecla Mining Edition [View article]
"The development of a new #4 Shaft and related infrastructure at Lucky Friday, when completed, would increase annual silver production from current levels of approximately 3 million ounces to 5 million ounces, with an expected average total cash cost of less than $4.00* per ounce of silver in the first five years of operation. The two key drivers for this potential increase of silver production are: 1) ore grade is expected to increase from the current grade of 10.4 ounces of silver per ton to over 14 ounces of silver per ton (a corresponding increase in lead ore grade is also expected); and 2) mill throughput of ore is expected to increase from approximately 350 thousand tons to 375 thousand tons annually."
The Silver Doctors did a writeup late last year on silver ore grades and discussed the largest silver producers ore grade. They put the big guy, BHP Billiton's Cannington mine as having an ore grade less than 400 grams/tonne (13 ounces). They give Fresnillo's multiple mines as averaging 10.6 ounces per tonne and Pan American's mines containing 4.7 oz/tonnes. As far as your contention that Friday is a narrow vain structure, I can only suggest you spend some time studying the Hecla web site. The photos of the mine tell a different story. In fact, the Silver Valley is noted for not only rich silver grades, but also and huge ore bodies. If the projected grade of 14 ounces pans out, The Friday will be one of a select group of ore bodies containing over 10 ounces per tonne.
Please justify your continued repeat of your seemingly incorrect assumptions or stop making them. Thanks
What It Really Costs To Mine Silver: The Hecla Mining Edition [View article]
I looked for guidance in your linked article centering on Gold Corp. You said:
"Simply put, it is all costs related to running existing operations with the goal of never expanding reserves, or making any discoveries on new or existing properties. We do not feel like this is an accurate measure because any mining company NEEDS to expand or maintain its reserves to survive, which is a very real cost of doing business in the mining industry. Companies should not report the costs it takes to sustain a mine, but rather the costs it takes to sustain a mining company."
If I read that right, you are saying that in Hecla's case, the upgrades at Friday are just a normal business (sustaining a mining company) issue. It wasn't that of course, they modernized the ancient access shaft that opens the gate to a huge reserve that is calculated to provide 30 years of increase silver production.
I think we can look forward to much lower cost per ounce figures for this year and years forward. If so, your conclusion that Hecla is a (perennial?) high cost producer chases people away from this great company, you have not done them a service...in my opinion.
The New Face Of Silver Wheaton [View article]
There is no mention (that I see) of Barrick needing to buy silver to deliver to SLW. Obviously, if they did have to buy it, Wheaton would just turn around and sell it with no change in silver supply and demand. I am aware that some analysts have speculated that Barrick would need to buy silver on the open market if the mine isn't built. They appear to be wrong.
Hecla Mining - Shareholders Overreact As Company Makes A Bid For Aurizon [View article]
I agree with your comment concerning MSHA needing to do something. I further believe (with no information to back it up) that Hecla quietly supported the shutdown order. They have been handicapped with that old crowded shaft and it really needed to be modernized...a project that even without MSHA oversite would have taken much of a year. In these days of finicky shareholders and algos ready to rip share prices apart on any decisions made that might mean temporary slow downs, it is near impossible for companies to do major maintenance and/or upgrades. I am pleased that the project got done.
They said Greens Creek was too big a bite for Hecla to take on by themselves. It looks like twice the mine that it was under Rio management. Lets go get some gold to backup the silver!!!
Hecla Mining - Shareholders Overreact As Company Makes A Bid For Aurizon [View article]
Thanks for the good job.
On Buying Silver Because Of The Gold To Silver Ratio [View article]
On Buying Silver Because Of The Gold To Silver Ratio [View article]
Hecla 17% Undervalued, But This Peer Will Soar [View article]
While it might be true that there are other potential liabilities for past operations out of the "Valley", they would be a speck relative to the huge Silver Valley Super Fund site:
"In 1983, the U.S. Environmental Protection Agency listed a 21-square mile mining area in northern Idaho as a Superfund site under CERCLA. EPA extended those boundaries in 1998 to include areas throughout the 1,500-square mile area of the Coeur d'Alene River basin project area. Under Superfund, EPA has developed a plan to clean up the contaminated area."
Be clear that CERCLA agreements are final. You are in error indicating there is still unsettled Silver Valley issues regarding Hecla and the EPA. It is a tenant of CERCA to wrap the entire cleanup action into one remediation plan and apportion costs to those who contributed to pollution. The judge has ruled on the settlement proposal for the "Valley" and Hecla has paid their share. End of story.
By the way, have you looked at all the other silver miner share prices: " In a little over a year ago" ? None have fared well.