Tonight's commentary will be lengthy. A. b/c I have found the time. B. B/c we have a special guest post tonight. Be sure to thank me.
I want to dive into todays news. There are several things I would like to bring to light. The 'registered' comex inventory slowly crept into a coma today, as it registered its all time low, ever. Soon enough it will re awake from this coma only to be shot in the head, again, and topple on the floor enjoying its long awaited dirt nap.
Those who are confused as to why some miners are getting slaughtered still can take some advice from John Embry today on KWN, "When asked about downward manipulation of the gold shares Embry said, “I think there is some outside force that is doing this. I’ve heard speculation that there’s a government driven algorithm to actively sort of make the gold stocks look terrible and keep people away from them. I certainly heard Jim Sinclair and Dan Norcini’s comments about the hedge funds driving gold stocks into oblivion.
I don’t understand because eventually how do you cover these things? The gold price is going to explode and these things are so cheap relative to the gold price. There’s only been one other time in my career when they’ve been cheaper and that was in 2008 when we had the complete panic, and see what they did after that, stocks recovered smartly. So they are going to recover again smartly, if hedge funds are doing this, they must have a death wish.”
More good news has arrived:
Banks that sold insurance on the debt of Allied Irish Banks will have to pay out to investors in the nationalized lender's debt despite complex legal manoeuvres by the Irish authorities to avoid putting the lender into default.
By Harry Wilson, Banking Correspondent
6:00AM BST 22 Jun 2011
The International Swaps and Derivatives Association (ISDA) yesterday said that a "credit event" had occurred on Allied debt, meaning the bank has effectively defaulted on its debt, a situation the Irish government has gone to extreme lengths to avoid.
Credit default swaps (CDS) sold on Allied subordinated bonds and, crucially, its senior debt, have been activated by the decision of the ISDA determinations committee that decides whether a borrower has defaulted.
The decision by the committee, which is made up of 10 major banks, follows the announcement earlier this month by the Irish High Court of a "subordinated liabilities order" that changed the terms under which junior debt in Allied was originally sold, forcing holders of the bonds to accept an extension in the maturity of the debt to 2035.
Allied had already missed a coupon payment on its Lower Tier 2 debt. However, changes in the law enabled the bank to avoid being forced to be formally placed in default.
For the market, ISDA's decision renders this move largely irrelevant as it means the bank will be categorised as in default in the eyes of investors.
This is not good. The actions of the central banks, IMF and all other parasitic PTB entities are cornering these institutions, countries (Greece and soon to be America!) with no exit strategy. The fire sales are coming. Or the defaults are coming. Case closed.
My Guest post tonight is from SRSrocco. Seeing now that the Comex and Kid dynamite are quite confident that the Comex is flush with the shiny orgasmic metal, lets take a closer look at the supply side, of course, this is also in rampant decline as well.
UNITED STATES SILVER PRODUCTION DECLINES 12% FIRST QUARTER 2011
Chart taken from the USGS Silver Mineral Industry Surveys
Silver production in the United States for JAN-MAR 2011 was 280,000 kilograms (kg). The same time last year it was 318,000 kg. Even though it shows 316,000 kg., if you look at the top of the chart you will notice that March 2010 was revised to 116,000 kg. This is a decline of a whopping 38,000 kg, or 12% over last year.
The constant theme in most of the USGS monthly reports as to why we are witnessing these declines is due to “FALLING ORE GRADES”. This is something I wrote about in an article titled “Peak Silver and Mining by a Falling EROI” which can be found here: Click here ...
According to the World Silver Survey, US silver production has been bouncing between 36-40 million ounces a year since 2005. Last year the total silver production was 38.6 million ounces. If the decline rate of 12% (JAN-MAR) continues throughout the remainder of the year, we could see a drop of 4-5 million ounces of silver in 2011. That would put total US silver production at 34 +/- million ounces.....less than the amount needed for US Silver Eagle coinage sales in 2011 which are estimated to be 36+ million.
Putting this into perspective, US Silver production in 2000 was 1,860 metric tonnes. In 2010 it was estimated to be less than 1,250 metric tonnes. That is a decline of 32.7% in just 10 years.
The United States supposedly has 8,000 metric tonnes of gold in reserve, but according to the USGS report, the US Treasury holds a lousy 220 metric tonnes of silver at the US Mint. Interestingly, this balance of 220 metric tonnes has remained the same since 2000. Is this not a good reason to be holding physical silver?
Falling ore grades and a declining EROI (energy returned on invested) will contribute to a peak in global silver production much sooner than later. Very few if any analysts are including this in their forecasts of future silver production from junior mining companies….which surprises me to no end.
In future posts, I will provide additional information on why a significant portion of future silver resources may remain in the ground due to the fact that in a falling EROI environment, this silver may not be economically viable to extract. This too is very bullish for owning silver going forward.
You know how to thank me ladies and gentlemen!