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  • Top 3 Gold Miners To Play A $1,500 Rally [View article]
    SMC - What is causing the confusion on total AuEq is the categories reserves (Proven & Probable) resources (Measured & Indicated) and inferred resources. It is cheating to combine them BTW. 2P Reserves are 10.6 mm Au and 467mm Ag oz. So Total 2P Reserves is 18.4 mm AuEq at 60:1. But when you add 2P reserves with resources (M&I) 12.4mm Au and 370mm Ag ounces total M&I AuEq is 18.6mm AuEq. So you have 18.4mm AuEq from 2P and 18.6mm AuEq from M&I for a total of 37mm AuEq (2P+M&I). Then if you add in inferred resources 6.3 mm Au and 2.7 mm Ag. So 9mm AuEq from inferred resources. So 37 AuEq from 2P+M&I and another 9 mm AuEq from inferred resources gives you that 46mm oz total.
    Jul 5, 2014. 10:10 PM | 1 Like Like |Link to Comment
  • Silver Bull: Another Cheap Silver Stock That Is Priced Like An Option With Major Upside Potential [View article]
    Be careful with this one. They have owned this project for 20 years. The company used to go by the name Metalline back when I owned it. It was a great project back then too. First how can they justify using a 5% discount rate for NPV? Next, their cash burn is much higher than what the CEO had said in an interview when he said 160k per month (actual is running about 2x higher). Next the article sited in this story that used early 2016 as a possible production date is over a year old. No way without a feasibility study completed, necessary permitting and only $3mm in the bank with a CAPEX needed of at least $350mm does this thing get into production by then. I like the zinc that lies below the silver deposit. I was looking for a cheap way to pick up zinc. That is what got me to circle back to this name after being out of it for 3 years. But using a more accurate discount rate of 10-15%, this project will remain unattractive until a sustained silver price of say $30+ is reached. So I think hope of a buyout at this point is generous and even at today's price I think it could be maybe fair value. It could still turn out to be a nice investment because a rising silver price will lift all boats. So you could get hit a 50-60 cent target. Which from today's price would at least give you a double.
    Jun 26, 2014. 01:47 AM | 7 Likes Like |Link to Comment
  • Silver Bull Resources Is Getting Its Ducks In A Row [View article]
    Here is a link to a counter point that will at least give you some of the other side of the coin. Also, I asked First Majestic directly about Silver Bull among other Mexico miners and they didn't seem interested in it at today's prices. They could have just been down playing? I doubt it. It is a big deposit but needs much higher spot prices to make it work or even an attracitve investment is my opinion.
    Oct 7, 2013. 11:05 AM | Likes Like |Link to Comment
  • SilverCrest Mines - A Growth Story [View article]
    Good article. As a long time shareholder I was fortunate enough to sell off half my position in SVL at $2.30 for a nice profit recently. I was motivated to trim after reconciling their going underground at Santa Elena. The company projects (all before Sandstorm stream takeaway and my est of a 62 GSR) 3.5mm AgEq in 2014, 4mm AgEq in 2015, then it falls 20% to 3.2mm AgEq in 2016, 3.4mm in 2017, 3.3 mm in 2018. It then spikes to 5.2mm AgEq in 2019 when they hit the best ore zones and see gold production double year over year from 2018 to 2019.

    So the growth story that I originally bought into years ago wasn't as good as I had hoped with the move to underground. They shortened the original open pit mine life due to high strip ratio (read cost too much) and moved reserves underground. They had originally said they would be doubling production based on the earlier Santa Elena PEA but now they have revised that statement. There is still the potential for a doubling by increasing production and optimizing grade upfront. The PFS optimizes the mining method upfront, this is a conservative approach. They could bring on La Joya by 2016 to fill in for the fall off from Santa Elena.

    I like the company (still own half my original position is proof) and as price has backed up it is again becoming very attractive. Would like to add it back in the $1.50-$1.70 area. If not I will go forward with the half I own.
    Sep 17, 2013. 12:44 PM | Likes Like |Link to Comment
  • Investing in Silver in 2011 [View article]
    Sorry, got too fast posting and left off one important part. This paragraph should go under my 2009 example.

    When you look at 2009 the usage factor on silver should be closer to 60%. This is due to the breakdown we find on the silver institute website. We learn there that approximately 137 million oz of 2009 production was investment demand. Factor that in with other fabrications and approximately 40% was not consumed.

    So using this factor of 40% left over x 710 oz = 284 million oz. Compare that to 74.7 million oz of gold you get a 4:1 ratio silver to gold. Still this is not even close to the 50:1 historical ratio mentioned, or the 16:1 ratio of the two metals natural occurrence in the earths crust.
    Dec 4, 2010. 10:39 PM | 5 Likes Like |Link to Comment
  • Investing in Silver in 2011 [View article]
    GOLD is 2 TIMES more available than SILVER. Okay now that I have your attention.

    Gold to silver ratio debates are always funny to me. I never hear anyone ever say that Gold above ground is nearly 2 times greater than Silver. But historical production and usage can prove just that.

    All the silver ever mined in the history of the world is approximately 50 Billion ounces +- a couple billion oz. All gold ever mined is 5 billion ounces. Now factor in that approximately 95% of all silver has been consumed and only 10% of all gold has been lost or used. That leaves you with 2.45 billion ounces silver and 4.5 billion ounces gold. Nearly a 2:1 ratio of gold to silver.

    Even if we say that only 90% of all silver has been consumed, that still leaves us nearly dead even on silver to gold above ground at a 1:1 ratio.

    Then let's look at current (2009) production numbers 710 million oz of silver v. 83 million oz of gold. Then multiply those times the usage factors and what do you get? You guessed it 2 times more gold left over v. Silver left over. 710 x .05% = 35.5 million oz of silver v. 83 x .90% = 74.7 million oz of gold.

    I would also argue that today there is no way that 10% of gold being produced is being "used or unrecoverable". It is probably less than 5%.

    Again the pivotal factor in all this are the silver usage/consumption factor. If it is truly 95%, silver is the less plentiful above ground metal. But even if it is 90% it would make the two metals nearly equal in above ground quantities.

    I have been a commodities bull for years and have believed in both metals for a very long time. But I rarely, if ever see any mention the above ground quantities when factoring in production and usage. Just thought I would inject something new and different than all the same old ratio arguments.
    Dec 4, 2010. 10:09 PM | 6 Likes Like |Link to Comment
  • Seriously, The SPDR Gold Trust Isn't a Scam. But PHYS Might Be [View article]
    I think PHSY has done a great job marketing the "redeem for gold factor." When Sprott said that on CNBC a few weeks ago you just saw the shares ramp. What is overlooked is the fact that you have to be holding over $ 400,000 worth of PHSY to be able to make a redemption. So, everyone that piled in and bought a few 100 or even a few 1000 shares on the "redeem for gold" tag line, better check their rights. Here is what they are according to the prospectus. Sorry, only those holding enough for a 350-430 oz bar allowed.

    Shares are redeemable for gold but “Redemption requests for gold must be for amounts that are at least equivalent in value to one London Good Delivery bar or an integral multiple thereof, plus applicable expenses.

    A ‘‘London Good Delivery bar’’ contains between 350 and 430 troy ounces of gold. A unitholder’s ability to redeem units for physical gold bullion will depend in part on the size of the London Good Delivery bars held by the Trust on the redemption date. Any fractional amount of redemption proceeds in excess of a London Good Delivery bar or an integral multiple thereof will be paid in cash at a rate equal to 100% of the NAV of such excess amount. A unitholder redeeming units for physical gold bullion will be responsible for expenses incurred by the Trust in connection with such redemption and applicable delivery expenses, including the handling of the notice of redemption, the delivery of the physical gold bullion for units that are being redeemed and the applicable gold storage in-and-out fees. See ‘‘Redemption of Units’’ for detailed terms and conditions relating to the redemption of units for physical gold bullion.”

    There are some tax advantages to PHSY, which no one discussed but still think much of the premium is on the "redeem for gold' tag.
    May 21, 2010. 10:19 PM | 2 Likes Like |Link to Comment
  • Eric Sprott Pushes Gold, Admits Missing Equities Entirely [View article]
    I think PHYS got a pop with Sprott on CNBC because he mentioned it was redeemable for actual gold. What didn't get mentioned is the fact that you have to own approx. $ 400,000 or more of PHYS to redeem. The prospectus states “Redemption requests for gold must be for amounts that are at least equivalent in value to one London Good Delivery bar or an integral multiple thereof, plus applicable expenses. A ‘‘London Good Delivery bar’’ contains between 350 and 430 troy ounces of gold.

    So on the surface it sounds great, shares are redeemable for gold. Looking at the fine print, how many that bought on Friday will actually know they can't make a redemption of their 100 or 200 shares for physical gold. I suspect the majority. If you bought 38,000 shares or more you are good, otherwise sorry, no redemption rights for you.

    They just paid a 12% premium for a right which in fact they don't really have.
    Apr 19, 2010. 12:11 AM | Likes Like |Link to Comment
  • Silver Short Squeeze: Once in a Lifetime Opportunity? [View article]
    Grant, first SLV investors just sell their stock. SLV investors can't ask for silver. But my point is in the futures market. When you purchase a silver futures contract currently it is believed that you can settle it for 5 - 1000 oz bars of silver if you want.

    But if you and everyone else show up wanting silver and they give everyone cash instead, what is the outcome of the value of those and all existing contracts? Seems logical to me that they would start selling at a large discount to the physical product and decline in price quickly because they are no longer able to be redeemed for the physical product and no one would ever be buying them. Only sellers at that point. Crooked yes, perfect way to let the big shorts making the rules out of the game and even for a profit, yes.

    Remember the goal of the shorts is to make the contracts go down or become worthless if possible.

    It might be the end of the COMEX. But so much dirty laundry is being aired by the CFTC that might not be a bad thing. But all the huge shorts actually make a killing paying you in cash for your ever declining contracts.

    History shows via the Hunt Bros case, don't rule out the lengths that the govt and banks will go to in protecting themselves.

    Here's the kicker, the banks and brokers would surely put together another market quickly. Hey new products = new commissions and fees.

    Here is what I am thinking if I am JPM and the rest of the big shorts. Time to move the game, tear down the old ballpark and make all the existing seats worthless. Then build a new ballpark and charge huge new PSLs and fees to get the fans the same seats at the new place. Don't think for a second they don't have the power to do it.

    That is just a short synopsis of a theory of mine for how the big shorts get let out of the game and actually make a killing. They will then be in there making a killing on the new market that they set up.

    I am a HUGE silver bull but think too many under estimate the lengths the rules makers will go to get the outcome they need.
    Apr 18, 2010. 09:15 PM | 2 Likes Like |Link to Comment
  • Silver Short Squeeze: Once in a Lifetime Opportunity? [View article]
    First I will state I am a silver bull and have been for years. But just curious when it is stated about demanding delivery, it is never noted that contracts can be settled in cash. I recommend everyone interested in a short squeeze on the silver futures market learn the Hunt Bros case. You will quickly learn that the government and the banks cornered them and took them out for slaughter through rules changes (margin requirements, closing the market to new contracts, etc.). So when you play a game where the rule maker and their right hand henchmen are on the otherside beware that it might not turn out the way that seems so obvious.

    My thought is if everyone shows up to demand physical silver deliver with their futures contracts, they will just settle those contracts in cash. Forced settlement in cash will kill the vaule of those paper contracts which means the shorts win.

    It will however create a much, much greater separation in price between paper and physical.

    I recommend that you buy physical silver and the miners.
    Apr 18, 2010. 12:57 PM | 1 Like Like |Link to Comment
  • Has Gold Been Manipulated? [View article]
    I have no problem hedging. I do it to protect my own portfolio. Miners hedging is smart business. But they aren't going to hedge more than they have too. They want the price to rise.

    That leads us to the banks and the bulk of the short contracts. The banks hedging "financial products" is a more questionable process but within in the rules. However, if the banks are hedging fiat currency exposure via short gold and silver contracts, I would claim that is more of a speculative activity. I would however, like to see better detail of what the banks are being allowed to hedge that is not considered speculative activity. But that is completely beyond the scope of the point I am trying to make here.

    My point is there is a bottle neck at the physical delivery point. That is the primary reason I think it is "stacked" towards the shorts favor. That physical delivery limitation prevents or deters demand from the long side. Therefore by definition if you are doing something that prevents or skews demand on one side of the transaction you are "stacking" it for the other side. In this case the short side.

    When a realtively small amount of contracts written are all that can be excersied and taken for physical delivery you are limiting the long side from getting the true users, the industrial users on that side of the market. They are going to go directly to the source, and only use the futures market sparingly.

    The Hunt Bros example and the fact that physical delivery is limited is enough to deter me from taking the long side in the PM futures market. I am but one small trader but if more feel like me, then again by definition detering investment in one side, even if it is within the rules of the game does mean the game is stacked in my opinion. Not minipulated but biased or in favor of one side.

    So I completely understand being market neutral. That is the basic objective of my personal portfolio management. I undertstand risk transferance, I do it every day. But my understanding of the underlying structure of the PM futures market I guess is going to have to differ than yours.

    Have a great Memorial Day.
    May 23, 2009. 03:30 PM | 2 Likes Like |Link to Comment
  • Has Gold Been Manipulated? [View article]
    Thanks for the response. You are obviously very well versed in the inner workings of the markets.

    I do think you have helped me further prove my point that the market is "stacked' in favor of the short side. You said speculators are limited as to size of position. Then state that Banks aren't speculators so they don't have to qualify for those limitations.

    So it seems obvious to me that if you have all the producers able to hedge their production and the largest financial institutions able to hedge at will, the game is at least a little tilted. In casino terms the short side is the house. The rules/odds are in their favor.

    Remember this occurs at the same time that physical delivery is limited in quantity from the depository. So physical demand by industrial users shouldn't be a big factor for the long side contracts. Those users have contracts directly with the miners for the physical product they need.

    So that basically leaves the long side primarily to speculators. Which, you have already said are limited. If you are a big money speculator knowing that you are limited in size by the rules of the game or even a little time investor, you would most certainly closely examine the market. You would see that the banks or miners are allowed to short all they want or have production against. You would see that there is no way possible that they will be required to provide even a fraction of those contracts for physical delivery.

    You also know that the other side is limited to actual users of the underlying metal. But as a industrial user you would most certainly go to the source to get your metal as delivery from the exchage is limited. So you might hedge some of your needs in the futures market but for the most part you are going to do long term contracts with the producers of the metal you need. Leaving only speculators and small time investors on the long side.

    So given those facts and rules of the market you should come to the conclusion that the short side is the preferred side. This is due to the fact that it would take an inordinate amount of speculators to be able to equal your ability to short because as a bank where you have no limits and as a speculator you do. So it would take a large group of speculators fighting at one time to drive the price higher. That might involve considered collusion, which of course would be illegal.

    I know you were trying to have someone prove manipulation. I am not trying to do that. I just want to show that the rules of the game appear to be biased. Some could call that "manipulation" but you know the rules of the game going in. So if you don't understand or know how the rules of the game are set up be prepared to lose money.

    Just like in a casino, you can go in and have a good run and make money. But the rules/odds of the game are in the Casinos favor. Over the long run the casino makes money by statistical conclusion of the games rules. I think the short side is the Casino.

    Until the banks are required to follow the same rules as speculators, which I never see happening, then the biased should be on their side. It is the rules of the game.

    So Ted can claim manipulation all he wants but the banks are playing within the rules of the game. So if his objective is to get the rules of the game changed, I wish him good luck, but I don't see how the demise/collapse of the metals futures market is going to be allowed. They didn't allow it to happen with the Hunt brothers, so it would take a much larger force, say a soverign state to force such a change. But when examining the rules, a soverign state isn't going to play the game, they will just go buy the physical product.

    I still state, if you want to be in the precious metals market, you should only buy the physical product or the miners of the product.
    May 23, 2009. 12:43 PM | Likes Like |Link to Comment
  • Has Gold Been Manipulated? [View article]
    I personally think the most important characteristic of the gold and silver futures market are the rules of the game. They are stacked against being long the contracts. Due to the Hunt Bros., the CFTC and the Federal Reserve changed the rules of the game. They set position limits on the long side and the combined amount of physical metal that can be taken for delivery in any single month is limited. Those changes are very important rules when considering investing in the metals futures market.

    So while the market might not be "manipulated" in a conspiracy since, it does appear the rules are set up in favor of the shorts or at least the threat of a rules change works as a deterrent from building a large position.

    At the top of the silver market, the banks were huge shorts against the Hunt Bros. They forced changes in margin requirements for the long side, and banned opening transactions. That's right when the banks were fully short, they restricted anyone new from joining the party while they took the bull in the market out and shot him. Hunt bros and followers were forced to cover in a market where the only people on the other side were the short banks. There were no changes in margin rules for the shorts, of course not, it was the people making and influencing the rules. So they could wait while the margin calls hit and just watch the market crash. The big banks were the biggest winners from the Hunt bros attempt.

    It is like Hank Paulson said, if you show them you have a bazooka in your pocket, you shouldn't have to use it. Well, history shows us the Fed and the CFTC will make sure that no financial ruin comes from a run on the physical commodity on deposit at the COMEX. In today's ideals of too big to fail, I am sure the COMEX would make the list.

    I would suspect that if gold and silver on deposit get below levels they are comfortable with, all contracts will be forced to settle in cash or no new opening contracts will be allowed. That should limit the price. If you want the physcal metal but aren't allowed to take delivery. Then what good is the contract to you? That isn't a true manipulation because it is the known rules of the game. So caveat emptor.

    I would suggest if you think the prices are being manipulated lower, then send a thank you letter to the FED and CFTC as well as JPM (likely one of the big shorts) and then take advantage of the 50% off SALE they are running and buy the physical metal.

    But know the rules of the game in the PM futures market aren't going to change to the detriment of the banks that are short. Our system doesn't work that way.

    On May 20 09:29 AM Brad Zigler wrote:

    > COMEX gold contracts are NOT settled in cash. Longs can stand for
    > receipt of physical metal during the delivery period. But delivery
    > is not the only way a commodity contract obligation can be offset.
    > Before a delivery notice is tendered, a futures buyer can sell his/her
    > contract at the current market pirce and realize his/her profit or
    > loss in cash.
    > Historically, only 2-3% of futures contracts are actually settled
    > by delivery. The vast majority are closed out prior to the delivery
    > period by open market transactions. That includes commercial and
    > speculative traders.
    May 22, 2009. 01:21 AM | 4 Likes Like |Link to Comment
  • Anatomy of a Giveaway, Or Why Stocks Soared Yesterday [View article]
    Not sure if this is what you are looking for but here is what I see.

    The private investor knows his max loss will be 65k using your example. The Treasury (ie tax payer) will suck up all the rest of the losses beyond that initial investment. However, the underlying asset that the investor still owns (50%) would have to decline basically 85% form original value for his share to be worth what he originally put up. That assumes that the Treasury and FDIC will eat all the losses beyond the private guys original investment upon liquidation of the underlying asset and the proceeds would be split 50-50.

    So the investor has minimal downside risk considering that the majority of the risk is laid off to other side, Treasury (ie taxpayer)after the initial investment. So if the asset is sold for 500k and the proceeds are split 50-50, the private guy just made nearly 3x his original investment even with it selling it at a 41% loss. The taxpayer isn't as fortunate.

    Hope that is what you are looking for. The private guy puts up 7.6% and the Treasury/FDIC takes the bulk of the risk. If the proceeds from disposal are split 50-50, I would put up 7% knowing that the underlying asset would have to drop 85% for me to breakeven.

    Heck, as the Treasury is hoping, I would even overpay for that opportunity if the system is indeed set up that way.

    Mar 24, 2009. 05:22 AM | Likes Like |Link to Comment
  • Uranium Miners Expected to Benefit from Falling Inventories [View article]
    I think you are correct to point that out. CCJ is currently trading at a price/book value of 4.8 not .8. Maybe they meant price to enterprise value which is under 1 but .95 not .8. So I am not sure where they are pulling this number either. I am long CCJ
    Apr 12, 2008. 07:03 AM | Likes Like |Link to Comment