Guest Post: "Future Silver Supply More At Risk Than Gold"

131
Mon, Jul 30, 2012 - 10:19am

Our friend and longtime Turdite, SRSrocco, has written another excellent research piece. It's lengthy, detailed and terrific so sit down, buckle in and enjoy.

Future Silver Supply More At Risk Than Gold

by SRSrocco

The focus of the markets and the alternative media is firmly placed on the continued disintegration of the world financial system. Many believe that the collapse of the fiat monetary system along with the global banking cartel is the worst possible outcome. However, this may actually turn out to be the good news in a sea of bad news that is lurking around the corner.

As the world's attention is currently directed at its massive paper-debt dilemma, a physical problem looms larger each passing day. This is what I call, the brontosaurus in the living room. The information provided in this article may help connect the dots to the reader who has been grossly misinformed by the highly specialized analysts in the various industries and media.

In the future as tens of trillions of dollars of debt masqueraded as wealth implodes, there will be a stampede into the best safe havens available -- the precious metals. Many believe gold will play the major roll in this upcoming transfer of wealth. While this may be true, silver could actually turn out to be the better choice when we consider the factors presented in this article.

The inspiration to write this article came while I visited several historic mining towns in Utah. One of these mines was the Horn Silver Mine located in Frisco, Utah. After spending most of the day looking at the remains of the town, its old kilns and the abandoned mine, I began to wonder how much silver was produced here and what were the size of its ore grades.

The Horn Silver Mine in Frisco was discovered in 1875 and by 1881 it was producing over one million ounces of silver annually. However, in a rush to get the silver out of the ground and not taking the time to brace the tunnels correctly, the mine collapsed in Feb, 1885. The one fortunate part about the mine collapse is that it took place between shifts so no one was hurt.

The mine started to produce again at a decent rate in 1887, but it never regained the level it had achieved prior to the mine collapse. In the 30+ years the mine was in operation, it produced over 14 million ounces of silver. This may not seem like a great deal today, but in its heyday it was the largest silver mine in Utah.

In its initial years of operation, the Horn Silver Mine produced silver at a staggering 1,608 g/t (grams per ton) or 51.7 oz/t (ounces per ton). We must remember that during this time, the United States was calculating these ore grades in short tons or 2,000 pounds. Today the predominant industry standard is measured in metric tonnes or 2,205 pounds. Thus, these earlier figures were approximately 10% lower than the comparable ore grades today. If we adjust the difference to fit present standards, it would be 1,769 g/t or 56.8 oz/t .

To understand just how much ore grades have changed in the silver mining industry in the past 100+ years, I decided to compare the Horn Silver Mine to a present day silver mining company. I choose First Majestic Silver Corp because it is a smaller producer and it has relatively decent silver ore grades (more about this later).

The Horn Silver Mine vs. First Majestic

If we look at the data compiled by the United States Geological Survey in 1913, we can see the annual amount of silver produced at the Horn Silver Mine:

The copy of the original image is hard to read, but the important figures to focus on are in the ORE & SILVER columns. We can see that prior to 1885, the mine was producing the most silver in a given year. At its peak in 1884, the Horn Silver Mine extracted 40,000 tons of ore and produced 1.56 million ounces of silver. The full potential of the mine was never reached due to the collapse of the main tunnels in 1885.

To get a better idea of richness of the silver ore grades that were extracted from the Horn Silver Mine in the first few years of production, take a look at the graph below:

Furthermore, during the first several years of production, the Horn Silver Mine produced 10,352 tons of lead at a staggering 41% ore grade. In its final year of recorded production in 1909, the mine provided 192,22 oz of silver at 18 oz/t and 1,686 tons of lead at a 15% ore grade.

If we fast forward to the present day and look at First Majestic's Q1 2012 Financial Report, we can get an idea of just how much more ore is required to be milled to produce silver. In the second quarter of 2011, First Majestic processed 482,077 tonnes of ore to generate 1.78 million oz of silver. The reason I selected Q2 2011 will become apparent in the following charts.

I took all the data from this report and compiled the graph below:

In the five quarters shown above, First Majestic produced silver at a range of 3.2-3.9 oz/t. Furthermore, according to their Q2 2011 results, First Majestic's average lead ore grade was 1.2% -- a far cry compared to its historic counterpart.

During the 30+ years the Horn Silver Mine was in commercial production, it processed a grand total of 474,780 tons of ore and supplied 14.2 million oz of silver. On the other hand, First Majestic processed 482,007 metric tonnes of ore (in just one quarter!) to produce 1.78 million oz of silver. This is the reason why I choose First Majestic's second quarter of 2011 as a comparable -- it was based on similar amounts of processed ore.

Over the life of the Horn Silver Mine, it produced 8 times more silver than First Majestic (in Q2 2011) when we compare tons of ore processed. Thus, First Majestic has to process 8 times more ore to produce the same amount of silver that came from the Horn Silver Mine.

We must remember, that during the late 1800's and early 1900's the majority of the work was done by human and animal labor supplemented by coal and wood energy sources. Today, the majority of work is accomplished by diesel powered earth moving machines and electricity from the grid or onsite electric generation. This is an extremely important factor when we consider the future production of silver... more on this later in the article.

How Do Other Silver Mining Companies Stack Up?

I can just hear it now. The skeptics are probably saying "Why don't you compare the Horn Silver Mine with mining companies that are producing silver at higher ore grades?" That is actually a good idea. Below you will find out how the more notable silver mining companies compare to the historic Horn Silver Mine:

As the graph states, the silver ore grades were calculated by the mining companies' Q1 2012 financial reports (unless noted) and by their total consolidated production. Fresnillo was the exception because its three primary gold mines (containing low grade silver) would have lowered its average silver ore grade unfairly.

Fresnillo had the highest average silver ore grade (10.6 oz/t) compared to the other current producers represented in this graph, while Silver Crest (1.3 oz/t) and Revett Minerals (1.0 oz/t) came in last. If we look at the different silver ore grades from the graph we can assume the average silver ore grade from the current producers would be between 5-6 oz/t.

Regrettably, I did not take the time to compile an overall average ore grade from all the current silver miners when I was acquiring the information for the article. However, I may be reproducing this figure as well as many other interesting statistics in future reports on the silver miners (possibly for a fee if the demand is there).

We can plainly see that the Horn Silver Mine produced nearly 3 times more silver during its lifetime than Fresnillo -- the highest silver ore grade of the group. If we compare the average silver ore grade of the Horn Silver Mine (30 oz/t) to estimated average of all the current miners (5-6 oz/t), then 5-6 times more ore is required to be processed today to produce the same amount of silver during the lifespan of the Horn Silver Mine.

For those who may have the notion that the Horn Silver Mine was an exceptionally high grade mine of its time... it wasn't. The average silver ore grades in the United States and Australia were extremely rich during the 1880-1900 period. For additional factual data, the reader can go to my article PEAK SILVER AND MINING BY A FALLING EROI, and scroll down to the chart that shows the average ore grades of various metals in Australia. During the 1880-1900 period, the average silver ore grades for mines in Australia were 1,000-1,400 g/t.

Now that we have an idea on how present silver ore grades have declined compared the silver mines in the previous century, let's take a look at what occurs in the future.

If we take a stroll to GoldMinerPulse.com where they have a link to their Silver List and we click on the area that says: BY GRADE, we will see a better view of the table below:

The companies posted above made the Canadian GoldMinersPulse Silver List if more than 25% of their in-situ (in the ground) value came from in-situ (in the ground) silver. Basically, the lower value and lower grade companies didn't make the cut. If we examine the list we can see that most of the predominant Canadian Silver Miners are included. Furthermore, this is the list in which I selected the majority of companies when constructing the Silver Miners Average Silver Ore Grades graph above.

The figure that stands out like a sore thumb and highlighted in yellow, is the overall average or grade of 62.3 g/t (or barely 2 oz/t) for all the companies on this list. This number is based on an average of all the companies' proven & probable reserves, measured & indicated and inferred resources. Some of these companies are still explorers and have not yet made it to the commercial production stage. Moreover, the later stage resources such as measured & indicated and inferred, normally contain the companies' lowest ore grades.

At a glance, we can see that Coeur 'd Alene (530 million oz @ 43 g/t) and Pan American Silver (1.38 billion oz @ 77 g/t) have helped bring the overall average down due to their larger volume of reserves & resources comprised of substantially lower ore grades.

The problem that the silver mining industry faces as its ore grades continue to decline, is the increased energy costs in processing more tonnage of ore to produce the same or even less silver in the future. Enter the Brontosaurus.

THE ENERGY SITUATION: The Brontosaurus In The Living Room

Alright, I get it. What do ore grades and energy have to do with the future supply of silver? A great deal as you will see. It is quite unfortunate that the U.S. Government and the main stream media have recently put forth information claiming, "The Future Oil Independence of the United States" when quite the opposite is true.

In describing these so-called energy delusions during a recent interview with Chris Martenson, James Howard Kunstler stated, "It's like a collective psychological break by everybody in American Society, fostered by a climate of the retailing of lies." This may seem a bit blunt, but I believe Kunstler hits it right on the forehead here.

The situation in the U.S. and world oil industry is so dire, it is simply amazing that we find very little in the way of open honest public debate. To truly understand the ramifications of a declining oil supply on the world's markets, a book can easily be written. However, it can be addressed here in four simple charts.

The first chart is taken from an excellent article written by Gail Tverberg titled, "Evidence that Oil Limits are Leading to Limits of GDP Growth." Here we can see in plain grade-school logic that as the world oil supply declines... so does global GDP -- pretty straightforward stuff.

If the oil supply growth turns negative as well as the world GDP, how will this affect the mining industry? Does anyone actually believe the mining industry will continue to grow its metal production while the world oil supply and global GDP decline? Well, according to the future forecasts by expert mining analysts... they don't see any problem with it.

The world is currently experiencing a plateau in global oil production and will soon be heading down the slope of continued depletion. Very few realize the massive amount of oil the world's oil fields supplied in just the past decade. In a comment to a post on TheOilDrum.com , written by Jeffrey Brown (westexas) and citing official sources, the world produced 23% of the total cumulative oil production to date between 2002 and 2011. The second chart below puts it into perspective:

From the research provided by ExxonMobil and Ken Deffeyes, the world's cumulative oil production up until 2005 was 1,000 Gb (billion barrels) with an additional 160 Gb (EIA) produced from 2006-2011 for a grand total of 1,160 Gb. According to this ENERGY REPORT, the total ultimate recoverable reserves of conventional oil are 2,000 Gb. Thus, the world has approximately 840 Gb of conventional oil reserves remaining. The peak of conventional crude has come and gone without the slightest peep from the oil industry.

To offset the peak of conventional crude, unconventional sources such as Tar Sands, Shale Oil and Natural Gas Liquids have be utilized. Even though these unconventional energy sources have supplemented the overall supply to help meet the demand of the market, they suffer from a lower EROI (energy returned on invested). The lower the EROI of unconventional oil sources, the lower net energy is available for the market -- basically, it costs more to produce and you get less to use in the economy.

The third chart, The Falling EROI: The Destroyer of Net Energy, forecasts how the declining EROI of unconventional energy sources destroys the amount of net energy available for the market. The ratios in red depict the amount of energy consumed in the production of oil & natural gas. For instance, in the 1930's, it only took one barrel of oil to produce 100 barrels in the industry. You can see how the ratios have declined as we move up the oil production graph.

Here we can see that the unconventional liquid energy sources (the world is relying upon in the future) come at a very high energy cost. Few realize that capital formation in the financial markets is derived from a high degree of net energy. As the net energy continues to decline, so will the availability of capital formation... thus crushing the growth of the global economy.

The three charts above should provide enough information to win over the worst peak oil skeptic. However, if this is not the case, the last chart should clear up things nicely. Most of the diehard contrarians of peak oil always bring up the fact that total global liquid oil production is still rising. While this may be true in total liquid energy production, it is not when we look at net oil exports.

It really doesn't matter how much oil a country can produce, but rather how much it can export that matters. In the final chart we can see that Available Net Oil Exports have already peaked in 2004-2005. The Land Export Model and the chart below were developed by Jeffrey Brown. According to Brown's calculations based on past trends, available net oil exports will decline from 35 mbd (million barrels a day) in 2010 to 16 mbd by 2020 -- a 50%+ decline in ten years.

The chart is based upon a conservative 1% annual decline rate of global oil production. The dark red area of the chart shows the amount of oil consumed by the "Top 33" oil exporters. The light red area denotes the (increasing) amount of oil consumed by China & India and lastly, the green area forecasts how much net exports will be available for the remaining oil importing countries. Of course these are only forecasts based on prior trends, but if these trends do continue the world will have to survive on a great deal less oil in the present decade.

For those who would like to acquire more detail concerning the energy situation going forward, you can do so at my second peak silver article," PEAK SILVER REVISTED: Impacts of a Global Depression, Declining Ore Grades & a Falling EROI".

So... how does the approaching energy predicament impact the future silver supply as well as the broader mining industry? Well, according to the United States Geological Survey (USGS), in their most recent update of world silver reserves, it doesn't seem to matter that much at all.

WORLD SILVER RESERVES: A Good Percentage May Just Stay Where They Lay

If you spend any time in the precious metal blogosphere you will read comments stating that the world only has 10-12 years worth of silver reserves remaining. This may have been true a few years ago, but it is no longer the case. It looks as if the folks at the USGS finally woke up and decided to add some figures to the countries with a N/A in their reserve column as well as update others with existing reserves.

In 2009, the world held 270,000 metric tonnes of silver reserves (nearly the same amount for the past decade). However, in their latest 2012 Silver Mineral Commodity Summary, the world now has a whopping 530,000 metric tonnes of silver reserves -- amazing what a few taps on the keyboard can do.

In just three years, the USGS has nearly doubled world silver reserves. If we take a close look at the tables, we can see that the majority of increases came from Chile and Peru. In 2009, those Chileans had no idea how much silver they had in reserve, but by the very next year they managed to scrape together 70,000 metric tonnes (displayed in the 2010, 2011 & 2012 Silver Mineral Summaries). This is by no means a paltry figure as it turns out to be more than 2.25 billion ounces.

Furthermore, I guess those Peruvians didn't realize that they had an additional 84,000 metric tonnes of silver reserves just laying around in 2009. All kidding aside, Chile and Peru accounted for 154,000 of the total additional 260,000 metric tonnes of silver reserves added since 2009.

As it turns out, the world now has more than 22 years worth of silver reserves remaining. This may seem like a real bummer to the silver enthusiasts who were touting the low silver reserves as another bullish reason to own the metal. On the other hand, reserves on paper may not be reflective of the true amount of metal the world may be able to produce in the future -- especially in a world of declining energy reserves.

For instance, a good portion of Chile's newly acquired 70,000 metric tonnes of silver reserves may just have to stay where they lay.

CHILE: Cracks Beginning To Appear In Its Massive Copper Industry

Chile is by far the King of copper producers. In 2011, Chile produced an estimated 5.4 million metric tonnes of copper. Peru came in a distant second at a mere 1.2 million metric tonnes. One of the by-products of copper production is silver and in 2011, Chile produced 42.1 million ounces of the precious metal. Chile is now the 5th largest silver producing country in the world.

For Chile to be able to produce those so-called 70,000 metric tonnes of silver reserves, it will have to mine a great deal of copper to do so. In order for the Chileans to be able to mine their huge copper reserves, they will need a growing supply of energy (especially liquid energy such as diesel to run the massive earth moving machines).

When I was researching diesel consumption in the mining industry, I came across an interesting trend taking place in Chile's copper industry. In the past six years (2005-2010) when Chile's copper production remained virtually flat, its consumption of diesel and fuel oil in the extraction of the ore has increased a staggering 50%.

This huge increase in consumption of liquid fuels was due to falling copper ore grades and the aging of the mine as well. As open-pit mines age, the haul trucks transporting the ore will have to burn more fuel as the mine expands and deepens. If Chile wants to grow their copper and silver production, they will only do so if they can grow their energy base. This is where the situation gets interesting.

In a recent news article, "Chile $100 Billion Copper Push Under Threat by Energy Scarcity", it was made clear that if Chile did not make massive upgrades to its electric power generation, a $100 billion worth of copper projects could be in jeopardy.

from the article:

The biggest-ever pipeline of copper projects is under threat as Chile, the world's top producer, struggles to contain rising opposition to new power plants.

... "Chile will have to shelve many of the country's mining investments due to the high cost and scarcity of electricity," Joaquin Villarino, president of mining lobby group Consejo Minero, said in Santiago on April 19. Delays will jeopardize a "significant" part of the proposed mine investments, he said.

and from another article concerning the same subject:

There are no easy fixes for tumbling ore grades at massive mines in northern Chile, protests over key energy projects that are threatening mining expansions and possible disruptions from extreme weather and labor unrest.

.... World No. 3 copper mine Collahuasi's output dipped in the first quarter of the year due to weather disruptions and grades, Anglo reported on Thursday, while the world's No. 1 copper mine Escondida saw its output plummet 25 percent last year due to a shock two-week strike and ore grade slips. (Link to the article: HERE)

Chile faces several daunting challenges in the future if it plans to increase its overall copper production. Furthermore, these two articles failed to mention the future threat of peak oil and the declining net oil exports on top of their rapidly increasing domestic mining problems. If we consider all of these factors facing the future of Chile's mining industry, it may be prudent to believe that a good portion of its copper and silver reserves may just stay where they lay.

Future Silver Supplies More At Risk Than Gold

We have witnessed that as silver and copper mines age, their ore grades continue to decline. This is also true in the overall mining industry when we consider the passage of time. Unfortunately, the best quality low hanging fruit in the metal industry were picked over a century ago. Today, a good percentage of the mining companies are just going over old mines and trying to make something out of the remaining scraps and crumbs left behind.

It would be nice if this phenomenon of falling ore grades did not affect the gold industry... but it does. Again, as ore grades decline and as open-pit mines age, it takes more energy to extract and produce the same amount of gold. To get an idea of the energy demands in the gold industry, I have focused on the top five gold miners in the world.

Trying to obtain the energy information and to list it in a standard format was a task in itself. The amount of fuel consumed was listed differently in various company reports. Mining operations chose to present their figures in either petajoules, megajoules, gigajoules, cubic meters or barrels. Each was then converted to more recognized measurement in gallons.

In 2005, the top five gold miners (Barrick, Newmont, Goldcorp, Newcrest & Kinross) consumed approximately 303 million gallons of diesel in their operations. By 2010, this figured increased 55% – to a total of 470 million gallons. (additional note: Lihir Gold now merged with Newcrest was excluded from Newcrest's figures in the chart below)

If we look at the diesel consumption in the top five gold miners, 20.4 gallons of diesel were needed to produce one ounce of gold in 2006. To produce this same ounce of gold in 2010, nearly 24 gallons of diesel were required.

New gold mining projects slated to come online in the future on top of those already in production will need additional sources of diesel to run their operations. If available net oil exports continue to decline, where will these companies acquire the liquid energy to run their gold mines? I would imagine this question rarely if ever crosses the minds of mining analysts.

Even though the gold mining industry faces the same future energy problems as the silver industry, it may indeed suffer a great deal less. Why?

The following chart provides the answer:

In order for the future global silver production to grow, it must predominantly take place in the base metal mining industry. When the world oil supplies start their inevitable decline in the next several years it will also force global GDP to fall as well. As the global GDP declines, so will the supply of base metals such as copper, lead and zinc. Thus, future silver supply is at more risk than gold because 70% of its production comes from the mining of base metals.

In contrast, 80% of the world's gold production comes from primary mines. When the world finally succumbs to the gravity of the hundreds of trillions of dollars in derivatives reverting back to their original value of zero, gold will become the center of banking and trade. Because the majority of gold comes from primary mines, it makes perfect sense for the world to focus its energy sources on the very metal that will be in the forefront of global banking industry.

That being said, this is not at all negative for silver. Silver is still the second best monetary metal to gold. In addition, as future base metal production declines (along with it silver production), this would force the price of silver to increase in response to its enhanced rarity.

I would also imagine this will motivate the mining industry to enlarge its number of primary silver producers as well as increase its overall percentage of primary silver production. We must remember, the most efficient way to use less energy to extract silver is the mining of underground reserves with high ore grades. That is why it makes perfect sense that these underground high ore grade mines will take a premium in the future -- basically, they utilize a higher EROI in their production.

Final Remarks

It is simply amazing to see professional engineers and geologists planning and designing technical mining reports for operations that are based on 25, 50 and 100 year life spans (such as the Alaska Pebble Project) without a comprehensive consideration of the future energy supply.

Future world energy constraints will impact the production of silver in a larger degree than gold. As the world finally catches on to the fact that silver production will decline greater in percentage than gold, its value will more than likely increase to a greater extent than gold.

All we have to do is to turn off the boob-tube broadcasting MSM propaganda and patiently await for the fireworks to begin.

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  131 Comments

question
Jul 30, 2012 - 12:59pm

SRSrocco/Turd

You guys rock!

SRS thanks so much for the time and effort you put into this research. Very well done. You've taken a convoluted set of inputs and presented them in a way that even I can understand. Too bad TPTB won't allow peak oil to be discussed publicly; even now we could mitigate some of the dire effects that will be coming soon to a theater near us.

Turd, thanks for providing the venue for this information to be presented. A bit of light dispels a lot of darkness.

Edit: SilverFocker

"Long horses and plows"; you are seeing the future.

SilverFocker
Jul 30, 2012 - 1:07pm

DR Jerome

Don't place any bets on Obama defeating Oromney..........those of us in the (D) column see that O has been a complete failure........his stated ideas were good on paper only.

While I don't think Oromney will be much different, we really have not much else to lose. The EPA will get crushed to a certain point.....his choice for replacing BB concerns me though, as does his thoughts on more war.

SilverFocker
Jul 30, 2012 - 1:08pm

DR Jerome

Oops......dup post.


Jul 30, 2012 - 1:22pm

No bets

This one is up for grabs. O has an excellent campaign team. And he has an enchanting voice.

Alas, the evil of two lessers.

TJeffson
Jul 30, 2012 - 1:30pm

@Silverfocker

If Romney wins and appoints Mankiw as Fed Chair, we're fooked just as much as with Bernanke, maybe worse. Bill Black ripped Mankiw up pretty good here: https://www.nakedcapitalism.com/2012/04/romneys-lead-economist-urges-pol...

In all honesty, 4 more years of Obama may be not as bad as 4 years under Romney. The reason: Obama would be a lame duck all 4 years probably with an all GOP Congress. Not much would get done, which is not so bad for us. With Romney, he'd have McConnell, McCain, Boehner et al going to town shoving all their shit laws down our throats just like Obama did the first 2 years of his term. That's ignoring all the facts that Romney's policies are just more of the same crap we've had since at least Reagan's first term. Obama is basically Bush's 3rd term anyway.

ETA: I'm not for either one. I'm for Ron Paul all the way. If I can't write him in, I may just vote for Gary Johnson or not vote at all. I will never vote the lesser of 2 evils again.

thurd aye
Jul 30, 2012 - 1:42pm

The Silver Maple is the

The Silver Maple is the purest (and most expensive). Another popular option is the 100 oz silver bar, which costs around £ 2,000. A physically backed silver E.T.F. offers a simple and secure way to do it. One tipped by experts is the Source Physical Silver fund.

Although the fund – strictly speaking an exchange-traded commodity rather than an E.T.F. – holds silver certificates rather than actual bullion, these are "secured by silver bullion held in J P Morgan Chase Bank's London vaults", the company said.

Is Billy Connolly in the metals game now? Or does he write for the Telegraph in London?

Patrancus
Jul 30, 2012 - 1:46pm

what costs are we

what costs are we to factor into the EROI equation for the "environmental movement" which began in earnest at the onset of the 20th century? at first glance it seems that this movement would and should play a role in determining how we have come to where we are today. For example does Federal government environmental law and policies that dictate and restrict where domestic oil and gas exploration may occur have any impact on production, or does it skew the numbers for peak oil or maybe the costs that might be important to include calculating the EROI model. How about a new refinery? the answer is always, "hell no way not in my back yard" and the Federal environmental law is there to back lawyers in the courts. Do billions of dollars paid in environmental legal fees have anything to do with decreasing the return on investment for oil companies? just thinking again

SilverFocker TJeffson
Jul 30, 2012 - 1:51pm

@Tjefferson

While I agree that we are in Bush's 3rd term, I am not so sure that we would be better off with a lame duck do nothing hill for 4 more years. This country finds itself in many terrible situations, most of which has an easy button to fix.....finding someone willing to push that button is another story unless RP has something up his sleeve.

The middle class has gotten decimated in the last 20 years and the train is picking up speed. I will not vote for any current members of the house or senate......this is where the buck stops.

While I realize these are the same pukes that will be responsible for the rise in PM prices over the long term, I also realize that this will come at a great cost to millions when the dust finally settles.

I know that it will take such an event to rid ourselves of those who have set out to purposely harm the people to line their pockets. I just hope one day, my Grandkids will see that although I was also one stupid enough to let it continue, I was also smart enough to see the error and start stacking PM's and other Prep's in hopes of giving them a chance to be part of a new beginning.

Terabyte
Jul 30, 2012 - 1:54pm

@TJeff & SF

Don't forget those Executive Orders. This joker will use those to the hilt. Be afraid, very afraid.

Nana
Jul 30, 2012 - 2:05pm

Silver up 55 cents. gold up

Silver up 55 cents. gold up green and the dollar up.

Is the divergence happening now?

thurd aye
Jul 30, 2012 - 2:08pm

To all the

To all the Newbies ,particularly those waiting for that wonderful 'moment ' to drop a pile of fiat into the golden /silvery pond. When that moment comes, it'll be so fast that it will have 'been and gone' before you get get on board with your big stack.You are timing the wind,and you will reap the whirlwind brothers/sisters. All the PTB need to do is cause a bank holiday and virtually NO buyers will catch the wave.If you don't try and time it ,your stack will be safely stored by that day,and crying the loss will not be necessary.Stack it now,stack it tall and have patience.You will be rewarded by knowing you have secured your family's future.Sleep well.

2 tickeys worth.(.80)

alphamorph
Jul 30, 2012 - 2:08pm

Silver vs Gold

It appears that Silver is leading the way (up) at every turn today. Very appropriate for this thread. A lot of the miners are faring well today also but alas, not the two I'm most heavily invested in.

Patrancus
Jul 30, 2012 - 2:10pm

EROI now we are putting the

EROI now we are putting the drill to the tooth, I must have struck a nerve, Ouch! sorry about that, just my nature to at least try and root out all the factors before I determine the answer I am able to support. Are you also a promoter of Eugenics?

Mickey
Jul 30, 2012 - 2:14pm

energy and availability

first, the energy market is probably as gamed by CB's as the PM market-as in bring down oil costs ahead of election.

what we have not seen as noted is PM prices rising over the past year. Me thinks a rapid rise in gold and silver prices would do wonders for miners even with higher costs.

But all this is why I diversify among miners gold and silver and some energy and other commodities. And concentrate not on the biggest miners (ie NEM and ABX) but others which can go all over teh place but offer more potential

PM markets rallying now so back to workstation.

Hypersonic14 Nana
Jul 30, 2012 - 2:19pm
Nana
Jul 30, 2012 - 2:25pm

http://www.silverdoctors.com/

https://www.silverdoctors.com/breaking-batman-shooters-father-was-schedu...

*Breaking* ‘Batman’ Shooter’s Father Was Scheduled to Testify As Whistle-Blower to Senate Over LIBOR Scandal

Someone posted a similar story last week too about this.

Nana
Jul 30, 2012 - 2:30pm

@ Hypersonic

Ah freedom, the dream of most....The nightmare of the PTB, they hate freedom, complete and utter control it their game/objective......

SRSrocco
Jul 30, 2012 - 2:31pm

REPLY...PATRANCUS...

Patrancus... the declining EROI is the friend to the environment. It basically forces the world to live within limits. This means it will be hard for humans in the future to rid the oceans of the last remaining 5-10% of the fish and mammal biomass of the oceans as well make it much more difficult for mankind to pollute larger areas of the world.

Eman Laer
Jul 30, 2012 - 2:32pm
thisismynewname
Jul 30, 2012 - 2:41pm

How high is high enough?

My stack that is - how high is high enough? How high is too high? I thought my stack was high enough and have been gambling - but maybe not? What say the Turdville minions?

Nana
Jul 30, 2012 - 2:42pm

@ emaN

Thanks for the link, great piece. Most revealing paragraph:

Gold may be the “linchpin” of the global financial system, but silver is the hare-trigger due to its equally established monetary history, tiny market size, and lack of above-ground inventory. That is why PAPER silver has been so maniacally suppressed since the gold standard was abandoned in 1971, the systemic “Achilles Heel” that will no doubt “break the Cartel’s back.” Not only is silver among the scarcest elements on Earth – prompting the U.S. Geological Service (USGS) to recently predict it would be the first extinct element – but investment and industrial demand are both growing exponentially.

https://blog.milesfranklin.com/the-ultimate-quadruple-top-breakout

The Vet
Jul 30, 2012 - 2:45pm

Something today is different....

I run two realtime charts from the same source, 1 minute interval spot gold and silver, displayed one above the other on the same computer.

Without any exception, those two charts have run for months matching tick for tick on both Au and Ag. There was NEVER a direction change or even a slight variation in each metal. Only computer generated trading could maintain such a tight correlation... Amplitude did vary a bit but timing and direction never did..

Today, the pattern has changed. While both metals are running in the same general direction the tick by tick synchrony has largely vanished. Apparently one or more real live human traders of size is in the market and running those HFT algos and the various bots into positions they are not programmed to handle. It is a minor deviation from the automatic trading but it is a deviation which is distinct and real.

Let's see what develops?

GoldMania3000
Jul 30, 2012 - 2:55pm

john embry-ok turd give it up already....

But the fact is that the interference is going to be overcome with a strong upward thrust in both gold and silver. We may finally see some interesting revelations in the silver market in the month of August. This could really light a fire under both gold and silver.

Mickey
Jul 30, 2012 - 3:06pm

ClinkinKY on Chicago and Rahm Emanuael (kind of OT)

copied here since this is a subscriber only article:

all sorts of problems and the school system is going deeper in debt. High net worth folks in Chicago still have summer condos there but have changed residence to a non tax state like NV or FL. They still pay property tax and sales tax when in Chicago but Illinois does not get the income tax. And the State and City continue to shoot themselves in their collective feet

This is not so OT as one may think cause its part of the fiscal problems. You can spin victory, but the extra teachers will cost over 50 mil a year in a system already 1 bil in debt--and the teachers union won giving them a 20% pay increase next year. In a few years the teachers and its union will be whining more that the city and state is not keeping its promises.

Coming full circle, the city school system is full of minorities whose families do not make enough money to pay tax in many cases. And the state and city have pushed the legit taxpayers out of city and state already with high taxes across the board.

this does not end well. But is the reason for us to be holding prec metals.

By Kristen Mack, Chicago Tribune reporter

July 30, 2012

For Mayor Rahm Emanuel, it's been the summer of discontent on the big issues of crime and schools.

The first-term mayor has spent much of it trying to avert a teachers strike and struggling to get a handle on the rise in homicides.

In some ways, Emanuel's predicament stems from his leadership style. He's known for identifying a goal, announcing a solution and marking down the achievement — even as the underlying problem persists.

Take the mayor's goal of stronger schools. The solution was a longer school day. Emanuel tried to push the Chicago Teachers Union into working more hours, which only increased tensions with the union as labor talks loomed. Last week, Emanuel backed off and said he'd hire more teachers instead.

"This is a major victory," Emanuel said. "The system no longer will relegate our kids to a second-class future with the shortest school day and school year."

Students will spend the extra time taking physical education, music and foreign languages classes, but there's no guarantee additional hours on those subjects will boost lagging district test scores. While the concession was heralded as a breakthrough in contract talks, many hurdles remain.

When it came to the mayor's goal of safer streets, his solution was to put an extra 1,000 officers on the beat. The Chicago Police Department says that's been achieved. Experts, however, argue that a side effect of moving officers away from targeted strike forces to beats has been an increase in shooting deaths and violent crime.

Sowing the seeds

The seeds of Emanuel's tough summer were planted in the winter of 2011 as he ran for office.

In a cramped storefront in the Roseland neighborhood, Emanuel declared his goal of making Chicago's streets safer.

On that frigid Sunday in January, he told members of the Kids Off the Block community group that he would put 1,000 more officers on the street. He wouldn't resort to the controversial method of moving cops from safer neighborhoods to more crime-ridden areas, however. Instead, Emanuel's strategy relied on shifting cops out of desk jobs and the untested notion of adding 250 officers to the ranks by redirecting $25 million from special taxing districts reserved for economic development.

The rookie mayor quickly figured out that the tax shuffle would be hard to pull off. Emanuel refused, however, to jettison the large round number, forcing police Superintendent Garry McCarthy to figure out how to make good on the promise.

On education, lengthening the school day and school year wasn't part of his original education platform. But by the end of the campaign, he saw the momentum building behind the movement — especially among the deep pockets backing the effort in Springfield, some of the same donors who bankrolled his mayoral campaign.

It became the focus of the mayor's education push, though he never spelled out how much more time he wanted, how those hours should be spent or how he would pay for it.

The practical implications of Emanuel's school and crime pledges are being felt. That's left Emanuel feeling the heat this summer as Chicago has experienced a 38 percent increase in the number of killings and teachers still are threatening a walkout as they try to resolve numerous sticking points in contract negotiations.

The crime problem

As a candidate, Emanuel said he would move uniformed officers out of desk jobs and take a closer look at officer "absenteeism" to make sure those who are on medical leave or limited duty were not abusing the system.

Shifting cops from administrative positions in buildings to the street proved easy enough. Getting hurt officers to rejoin the ranks is a bigger challenge. After being in office more than a year, Emanuel this month asked top aides to come up with a set of reforms to the department's disability leave plan. That's expected to take some time.

To reach Emanuel's 1,000 cop pledge, McCarthy chose to disband specialized strike forces. The 450 cops that targeted violent hot spots were shifted to beat patrols, a move that amounted to a different assignment, but not more officers on the street.

When the police union criticized his moves, Emanuel modulated. He went from saying he put more cops "on the street" to more cops "on the beat."

Technically, that's true. Aldermen, however, are increasingly calling on the mayor to reinstate the strike teams, which they credit with tamping down violence and stopping crime before it happened.

The increase in homicides year to year has resulted in Emanuel announcing several new aspects of his crime-fighting approach. He wants to shut down problem liquor stores, knock down vacant buildings the city has identified as gang havens and push state racketeering legislation that gives county prosecutors more ammunition to go after gang leaders.

Perhaps most notably, Emanuel and McCarthy are saturating "conflict zones" with extra officers in the city's most dangerous areas, an approach not unlike the strike teams that were dismantled.

Hard-pressed for help, the mayor also has welcomed the assistance of the Nation of Islam, and for the first time the city gave CeaseFire a $1 million grant in hopes the organization staffed partly by ex-felons can help curtail summer violence.

The group, featured in a critically acclaimed documentary, has had an uneasy relationship with police, who have been wary about the group's use of "violence interrupters," people who are often former gang members. CeaseFire, in turn, prefers to keep police at a distance while it mediates disputes among gangs.

Emanuel, who boasts of his impatience as a virtue, now has to wait to give his larger policing philosophy time to work.

Strategy is a constant game of adjustment, but there are limits, former police Superintendent Jody Weis said.

"You've got to give them a certain amount of time," he said, adding that there's no definitive timeline of three months or six months.

"If you're still losing the game, it's probably time to start a new strategy," Weis said. "The flip side of that is that you can't announce a new strategy every other week."

Seeking stronger schools

In contrast, Emanuel's school strategy has remained steadfast. He has relentlessly beat the drum about Chicago students being shortchanged by one of the country's shortest school days and school years.

In short order, Emanuel won approval in Springfield for the longer school day and year, then his handpicked school board angered the teachers union by cutting in half a 4 percent raise that was in their contract.

If the union was on its heels at the start, in recent months it has knocked the mayor back on his. The state law Emanuel pushed through to raise the bar on a teachers strike vote to 75 percent seemed like good strategy. When the union took a vote, despite Emanuel's attempt to delay the balloting, about 90 percent backed a walkout.

That was followed by an arbitrator's report that largely sided with teachers. The arbitrator questioned why Emanuel's school board would extend the school day when it doesn't have the money to pay teachers for the increased time. The district has a $655 million budget gap, and the board plans to drain its cash reserves to plug it.

In the aftermath, Emanuel pitched an idea the teachers union proposed earlier. Last week, the two sides announced a tentative deal to hire nearly 500 teachers for subjects such as gym. The agreement means students will be in school longer, but the workday will remain the same for most teachers. The price tag will be up to $50 million.

Emanuel still won't say where that money will come from, but he said the board will "obviously find savings to achieve our goal."

The concession allowed both sides to declare victory. The teachers union had beaten back a yearlong push by the mayor to make them work more hours. Emanuel was able to proclaim the school day would be longer, even if the extra time might not be spent on core classes such as reading and math.

A laundry list of issues remain, including class size, salaries and how pay increases are handed out. Job security, recall policies for fired teachers, a new evaluation system, health care costs and the length of the school year also are on the table.

Even so, the breakthrough last week has led Emanuel to declare that the school year will start on time.

Mickey
Jul 30, 2012 - 3:18pm

BTW--Arnie Duncan

BTW--Arnie Duncan was the former head of Chicago School system. He was named by Obama to fill cabinet position of director of Education or whatever its called.

He left the Chicago Public School System with 1 Billion in debt--all fits in with the Chicago way picture. Rather than bringing in a person with clean credentials of improving a big system and reducing debt--brought in a guy who messed up in Chicago and put the chicago school system deeper in debt-

is there any surprise that the current administration cannot and will not fix economic and fiscal problems? we would not want to bring in the best and brightest-when you can bring in someone who sucks up to the President. A yes Man.

Hence, even with the volatility rest easy with your precious metals positions. The problems are not going to be fixed anytime soon.

Nana
Jul 30, 2012 - 3:29pm

@ The Vet

Maybe Sprott bought his silver?

dropout
Jul 30, 2012 - 3:34pm

In Your Hand

@third aye

If gold and silver ETF's are such a great deal, then why do they trade below the spot price?

Both main ETF's GLD and SLV trade below the spot price of gold and silver respectively. Versus such unencumbered physical metal backed entities as The Central Fund of Canada (equal parts gold/silver) and the Physical Gold/Silver Sprott Funds, which consistently trade at a spot plus premium to NAV. Sometimes as high as +15%.

A silver or gold certificate is still just a piece of paper with attendant risk attached. Owning the physical gold or silver bullion under your own control contains hardly any risk. Accept for the amount of water borne accidents that plague transporting!

Silver Chunk jonoso
Jul 30, 2012 - 3:41pm

Anybody see this?

This may be off topic or maybe not, but just a question.

Does it look like to anybody that the cartels and big PM movers are just trying to flush out all of the little guy’s silver? Guys like me. Let me explain; I don’t trade, I buy and always have since the early 80s. I am sitting on silver I bought in 1983 and have never sold any of it. I just buy it and sit on it like a chicken.

I read a while back that the daily spot was determined each day by the conflict between the cartels and day traders. The day traders buy on the dip and run the spot up while the cartels are sitting on thousands of contracts waiting to dump on the anticipated high. Thusly; crashing the market daily spot. Is this right? It sure looks that way.

It seems that the cartels have come to the realization that the days of making $10 to $15 per Oz. are gone and have figured out if they hold a few million ounces on contracts all they have to do is repetitively buy and dump for a couple of million $s.

I don’t want to give any impression that I’m some kind of sophisticated trader or even close and as someone that is so far on the outside, I need binoculars to see in, but is there something going on here that I don’t see?

Silver Chunk
Jul 30, 2012 - 3:47pm

Anybody see this?

This may be off topic or maybe not, but just a question.

Does it look like to anybody that the cartels and big PM movers are just trying to flush out all of the little guy’s silver? Guys like me. Let me explain; I don’t trade, I buy and always have since the early 80s. I am sitting on silver I bought in 1983 and have never sold any of it. I just buy it and sit on it like a chicken.

I read a while back that the daily spot was determined each day by the conflict between the cartels and day traders. The day traders buy on the dip and run the spot up while the cartels are sitting on thousands of contracts waiting to dump on the anticipated high. Thusly; crashing the market daily spot. Is this right? It sure looks that way.

It seems that the cartels have come to the realization that the days of making $10 to $15 per Oz. are gone and have figured out if they hold a few million ounces on contracts all they have to do is repetitively buy and dump for a couple of million $s.

I don’t want to give any impression that I’m some kind of sophisticated trader or even close and as someone that is so far on the outside, I need binoculars to see in, but is there something going on here that I don’t see?

Xeno
Jul 30, 2012 - 4:15pm

Great Article SRS!!

And thanks TF for the post!

Let me see if I get this, so 70% of $ilver supply comes from base metal mining. It would seem that in a slowing economy and a reduced need for base metals that that 70% source would be curtailed - never mind rising fuel costs or supply constraints. So by itself, one would think that the $ilver supply would be even more scarce with the only option to garner more supply would be via higher prices to coax out supply - in an economic slowdown nonetheless.

SUA, I hope you've got yours because when things pick up, and they will, the price paid will be much much higher. Good thing for us that the overall cost of $silver per item produced is not a high enough % to greatly impact the cost of finished goods to the upside.

$ilver - nothing but net. swisssshhhh

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