Wednesday, September 7, 2011

Guest Post: Frustration with Gold-Silver Analysts; Bottom Line with Junior Explorers and Peak Silver Article Preview

BY: SRSrocco

It has been a while since I have done a Guest Post. As I have stated before, I have been extremely busy doing research and putting together graphs on my Peak Silver Update Article to come out in about a week. I truly believe this article will be one that might change how analysts and investors look at silver into the future. It will be my best article written to date and I hope it will wake up those in the industry.

My last article on Peak Silver got over 35,000 reads on the Market Oracle. If you look below you can see how my Peak Silver article compares to Jim Willie’s readership.


I put that up to show just how much the investing public is interested in PEAK SILVER. I could care less about competing or the accolades…..instead it is important for me to get the word out on this subject. I hope this update will get even more reads. If any of you want to check out any authors on the Market Oracle website, all you have to do is click on one of their articles and click on their name at the top. It will give you a list of all their articles and how many reads they received for each. I didn’t get many reads on my last article on the Complete Cost of Mining Silver, but at least I beat out NED SCHMIDT’S lousy article on Gold Worship and Donuts.

Before I continue on this post, I want to say I look forward to SGS’s new website. Also, we have to give him credit for making some good calls before the rest of the investing public heard about it. The latest is the sellout of Silver Dragons….Kudos SGS.

In doing the research on my article, I still listen to interviews on different websites. One of my favorites is King World News. Eric King has great guests like James Turk, Rick Rule, and John Embry who talk about the mining stocks. Even though I appreciate their enthusiasm, they fail to understand the FALLING EROI and its impact on mining going forward. This will be discussed in my article. I believe a good percentage of Junior Explorers will never reach the commercial mining stage due to the collapse of the world’s financial system, declining ore grades and the falling EROI.

When I first started to invest and trade Junior Miners, I used to get swept away by the PR of “DRILLING RESULTS”. When XYZ Company would announce that they just hit “8.3 meters of 1,500 grams a ton silver”, I thought “WOW…THIS STOCK IS GOING TO MOVE”. I now realize just how silly, na├»ve, stupid and ignorant I was to get caught up in that nonsense.

Things have changed since years ago when we had plenty of CHEAP OIL and all the ENERGY to do whatever we wanted. Now, I disregard all that hyped PR put out by the investor relations departments of junior explorers and go right to the meat of the subject. …and what’s that??

1) WHO IS THE MANAGEMENT
2) WHAT IS THE AVERAGE ORE GRADE & TOTAL OUNCES
3) WHAT IS THEIR TIMEFRAME TO BE A COMMERCIAL MINE

Everything else is just PLAIN OL FRICKEN WHITE NOISE in my book. Sure, some good drilling results might make for good trading opportunities, but in the end, it’s the average ore grade and total ounces that really matters. Who cares if Tiger Woods or Greg Norman got a HOLE IN ONE. What is important is their AVERAGE GAME SCORE over several years of playing.

It is due to my frustration with the Gold and Silver analysts that I have spent time putting together my PEAK SILIVER UPDATE article. Blogger TOM H…I think you will enjoy this article more than the previous one.

I will be discussing energy and the falling EROI; impacts of a hyperinflationary depression on silver; declining ore grades along with a case study on USA Silver production. My guess is the article will be at least 15 pages long…..maybe even 20. Here is a SNEAK PEAK of one of my graphs:

The USGS once did a great job in detailing where every ounce of silver came from. Today their Silver Mineral Yearbooks are a joke compared to the past. If you go back to 1935, you will find that there were over 200 pages on Gold and Silver alone. The most current 2009 Silver Yearbook is a measly 15 pages and it has so much “W” withheld information due to proprietary secrecy…..it’s downright worthless. The only state that shows how much silver it produces is Nevada, while all the rest are included in one big phat single figure.

That being said, the graph above shows the declining ore grades of silver in two categories. Silver ore was broken down into several different areas…..Gold ore, Silver ore, Copper ore, Zinc ore, Lead ore and a combination of all base metal ores. To make a long story short, the best way to show the declining ore grades for U.S. Silver was to just use only the COPPER and TOTAL SILVER ORE categories.

The Copper ore is self explanatory. This is the grams per ton of silver produced from copper mining. We can see that in 1940 each ton of mined copper ore produced 9.95 grams per ton (g/t) silver. This turns out to be 0.32 ounces of silver per ton….or about a 1/3 ounce of silver. The last good detailed USGS report was in 1993. As you can see, the silver ore grade had fallen to only 1.71 g/t or 0.05 ounce per ton….or a twentieth of an ounce. That is a substantial decline.

The TOTAL SILVER ORE category is taking every ton of mined ore and dividing it by the total ounces of silver produced that year in the USA. In 1940, this was a staggering 23.95 g/t (0.77 oz/t) of silver taken from all mined ore in the country…and that is from mining Gold, Silver, Copper, Zinc and Lead. In 1993 it fell to a breathtaking 3.39 g/t (0.11 oz/t) or a 7 fold decrease.

It becomes painstakingly clear that “NASA…WE HAVE A PROBLEM”. Again, the most important aspect we face is the falling EROI which most analysts are clueless. I will explain more in the article and future posts.

23 comments:

  1. WTF just happened to gold and silver?

    Flash crash!?!

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  2. WTFFFF?

    Selloff or short covering? By looking at the volume, it looks like there is a lot of volume during price drop, so imho it's a selloff, but some volume after the price drop also ...

    Anyhow it's going back up as we speak ...

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  3. can anyone explain how silver and gold both drop like rocks at same seconds so often, i mean it's like twins ... as phony as Apollo missions

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  4. http://www.youtube.com/watch?v=LmQiaSDr3nk

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  5. @IslandStyle @mrktwtchr:

    Ledbedder said...
    The Relative Strength Index (RSI), looks terrible for gold & silver right now. Caution should be taken. If you're in stocks, take it on a case by case basis. GCZ11 currently $1887 and SIZ11 currently at $42.295.
    September 6, 2011 5:12 AM

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  6. This comment has been removed by the author.

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  7. Combining a harvey organ guest post article with a clive maund article I discovered this from them: technical analysis hedge funds just picked up a bearish double top and a powerfully bearish "gravestone doji" candlestick on gold's chart from last night and are selling. HFT trading is kicking into gear on any moves in price and there is no liquidity because the big 4 are not trading gold right now. the huge daily volume we see in gold is actually from HFT and NOT OVERNIGHT POSITIONS, Technical funds have swept in to trade the technicals in the last 8 hours. I posted about this last night at 11pm in 5 consecutive posts

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  8. big trading houses that took losses on shorting gold recently are restricted from counterparty positions due to losses, therefore, there will be a very volatile correction and in a few weeks, a very volatile rise and breakout

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  9. also, euro banks need dollars, the euro is crashing, and the swiss is temporarily devalued, so the dollar will rise a lot, which is technically also bearish for gold and silver and the technical funds are swooping in to the low liquidity situation

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  10. I just got an email from saxo bank saying they are rising forex XAG, XAU margins for 50% and comex futures margins to 10.950 USD.

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  11. ^^^^^^ margins will be raised on frinday.

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  12. SRSrocco

    Looking forward to seeing your report !

    Thanks !

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  13. srs i'm excited for the report and to share it with my network

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  14. Question I guess is- with what is obviously going on, is a move of some USD into RMB via forex a good long term investment at this point?

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  15. For those who use the TSX, HBD is a good way to make a tad bit of profit during this downturn if you don't have a margin account.

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  16. I think damijan is right, a couple after the close comex margin increases on friday in response to gold's never before seen volatility would send gold below the 200 day A margin increase would be least expected by dumb money after a fall has commenced

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  17. So much for $75 Silver by years end.

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  18. highrise the volatility seems so extreme silver could go to 30 and back up to 75 by years end

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  19. SRS,

    Thanks for all the research and hard work you put into those articles.

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