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

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turd [at] tfmetalsreport [dot] com ()

  131 Comments

Karankawa · Jul 30, 2012 - 11:59pm

SRSrocco

Read your article earlier today. Excellent work. The following is just my opinion from my current level of learning.

If you are going to charge for reading your work, do it now. 12 years ago I subscribed to the very few things available I found significant at the time that would help me understand where we were going, and only for awhile, as their message became somewhat stale to a person doing their own research.

Things are very dynamic now, and information is becoming cheaper, only because people are getting in 'survival' mode and know that educating their neighbor is more beneficial to them and their posterity than making a few bucks. (But there are bucks out there owned by lazy people!)

That is just my opionion as far as newsletters anyone might want to start right now goes, and I have a terrible habbit of thinking everyone knows what I do after I've told them what I've learned.

As far as this article goes, if you had a chipin I'd voluntarly 'chip' something because I absolutely respect your work. Long before I heard of John Williams, I started a project of 'undoing' all of the changes the fed has done to their reporting since 1980. Needless to say, I got bogged down by the complexity, but the research gained me the overall picture even though I didn't come up with a clear number. But I subscribed to him for six months or so.

I've seen the massive copper mines getting less while doing more. I knew it must be happing in silver, but your research nails it.

Just my thoughts. And understand I would be a terrible marketer. But I know excellent work when I see it, and this is absolutely top notch, as well as a pleasure to read.

Karankawa

Louie · Jul 31, 2012 - 12:00am

Great Post!

Many hat tips to SRSrocco for this great post! Gives us encouragement that we are right, so just sit tight. There is no other investment to be in right now, other than PMs. 

Hat tips to Turd also for being willing to post someone else's work on his web site. I would imagine it is kind of like the first time you let some boy take your daughter out on a date. Put SRSrocco on the short list of approved guest posters for the next time you need to unplug. 

SRSrocco · Jul 31, 2012 - 12:23am

AGAIN... THANKS EVERYONE FOR THE COMMENTS..

Karankawa.... thanks for the reply. I also appreciate the input on the FEE QUESTION concerning future reports. I enjoy doing research and sharing what I know with the public and everyone here. The only reason why I am considering producing these reports for a fee, is I believe they will offer something no one else is providing. 

Furthermore, I believe there will be a decent amount of companies and investors who won't mind paying the fee as it provides them a service that they won't have to do themselves. Anyhow, those are my thoughts.

Of course, I will still be doing these kind of detailed articles.

I sent a PDF of the article to Jessica Lau, Eric Sprott's assistant. I asked her to forward it to Eric.

Lastly, I just received an email from the folks at THEOILDRUM.COM. They want to also post it on their site... and they are an energy blog.

Titus Andronicus · Jul 31, 2012 - 12:42am

Silver COT Analysis

I'm reposting this from a different forum:

OK. I finally got around to doing this. It just seems like it is important.

Here's my COT graph for silver. Sorry it is not very clear. I can't seem to figure out how to compress and resize and upload a clear picture. But I can make my point.

The important things about the graph are:

1) Silver is in a wedge and there is not much room left before it breaks up or down. The rising trend line dates back to 2008 while the falling trend dates back to our favorite Sunday night back in May 2011. Both trend lines have been tested, but not violated, which is going to end within a week or two at the most.

2) The commercial position in the COT is very bullish. Not since 2001 has the net commercial position been so high. (This is the middle part of the chart with shades of red and green.)

The problem with COT analysis is that it is not very precise. This is especially true about timing. It is difficult at best to use the COT to time the market -- I don't even try anymore.

But the great thing about this wedge pattern is that there is no time left! It will almost certainly either break up or down. And with this bullish COT, I do not expect it to break down. (Or rather, break down and stay down.)

We definitely could get a drop in price which would certainly be accompanied by a rising (more bullish) commercial net position. This is definitely possible -- especially with the FOMC on Wednesday.

I'm actually not sure what is going to happen. I have my physical stash, but I don't hold trades for more than a day anymore -- so I'm not planning on trading this.

If we do get a drop, it should be a great buying opportunity. (No guarantees!)

Karankawa SRSrocco · Jul 31, 2012 - 12:42am

SRSrocco

As I've said, your work is absolutely top notch. In the 70's I moved to Colorado, and as a young man bought a Jeep and visited many abandoned mining towns I found in history books in the local library.

I never invested in gold and silver then because I didn't have a clue. Coors went on strike at the time and I read in the paper that many of them returned to gold panning to make ends meet. I did some of that as well but never made gas money. But I wouldn't trade the memory of one single trip.

I lived in the county at the time and had a neighbor that was a buyer at the same company I worked for. He was buying Junk Silver and said he would do so until he retired.

I've long since lost touch with him, but I hope he kept it up.

You have an awful lot to share and a good mind to do so, it seems to be your passion and you should feel absolutely confident in being rewarded for your work.

In Liberty,

Karankawa

johnnydow · Jul 31, 2012 - 12:55am

Historic

explosive, breathtaking, explosive, mega. Phoenix rising stuff. Did I miss anything?

These are not bottom signs.

Good article SRS.

Thanks Roark for a post/thread back a few ago about the crop report history.

These guys talk COT reports.

Smoke it if you got it.

Karankawa SRSrocco · Jul 31, 2012 - 1:13am

I might mention.

Reading the Perfect Storm on Puplava's site (which was one of the few that was addressing the truth at the time), changed my life view of the 'system' ... lost me an investment advisor (happily), and a few friends that seem to be returning over time. That was a few years ago, and they are runing out of avenues.

Karankawa

Antrobus · Jul 31, 2012 - 1:17am

Nuclear Safety

I see that Germany has now crossed the 25% threshold - 25% of its power comes from renewables now. Japan I think will take the same path. The decisions here are simple risk/reward. The USA (for instance) has the benefit of a few years of some cheapish electricity from some very cool (nuclear) technology, versus the risk of losing the whole country if Indian Point does a Fukushima and NY is rendered uninhabitable

The GE mark 1 boiling water reactor, of which there are still a number cooking away in the States - if the GE Mk1 loses power, it blows up. Simple. That's why they have so many backup power sources, like on site diesel generators. This is fine as long as you have power to pump the diesel fuel to power the backup generators, or to power the pumps for the trucks to deliver more fuel. The reactor can be shut down and not be delivering power and it still needs months of cooling to prevent a meltdown. So, if there is a long and widespread power failure the US has an existential problem.

Each GE MK1 is a potential planet poisoner. At Fukushima, If the wind had been blowing to the South and carried the hot particles and smoke over Tokyo - well, that would have been it for Japan.

El Gordo thisismynewname · Jul 31, 2012 - 1:51am

watchingdog

If you have any significant paper assets, your stack is not big enough.

Mr.Grey · Jul 31, 2012 - 2:03am

Part of the cost

Of fuel is getting it there. I worked in a small gold mining operation in alaska. We ran 24/7, we had a couple d-8s, couple d-6s, 980 cat front end loader, the wash plant, Hitachi excavator & odds & ends that used fuel. We went through about 25,000 gal/mo. This fuel had to be flown in with an old dc-6. Conditions for landing aren't always good but you pay for the trip whether they deliver or not. Many of these mines are remote and it is often not cost effective to retrieve equipment when mining is finished. As an example you can probably buy a sevicable D-8 dozer in anchorage for 25k but it will have to be broken down to three separate loads in a herc @ 25k/load so now you have 100k in a 25k dozer.

I have a friend that has some claims on an island close to kodiak. These claims are on the beach. Every couple years he puts the beach through some centrifuges. The wave action replentishes his claims for him.

S Roche · Jul 31, 2012 - 2:35am

Baby Boomers & Bernankeism...

​A recent survey of baby boomers conducted by the builder Pulte Group showed that 61% planned to retire within 10 years, that only 14% said they would be financially unprepared to do so, and that 59% said they would not postpone retirement and might accelerate it. While the survey showed one encouraging trend, that boomers planned to retire at an average age of 67, compared with 63 20 years ago, the overall trend of the survey was relentlessly positive about baby boomer finances. Interestingly the survey also said that baby boomers feel on average 15 years younger than they are—which suggests that baby boomers are, on average, delusional.

Baby boomers who are approaching their relatively late retirement at 67 with $500,000 no doubt feel they are in pretty good shape. They will awaken from their reverie when they discover that one typical insurance company quotes that amount as purchasing an annuity of only $2,966 per month ($2,755 for women) with no pension for the surviving spouse or guaranteed minimum payout period. Doubtless, most baby boomers faced with this shock will opt not to annuitize, hoping that between 67 and 74 or so, when their money runs out, they will graduate from feeling 15 years younger than their actual age to being dead, solving the problem. Delusional, as I said, but one can hardly blame them. The poor souls are victims of Bernanke’s ultra-low interest rates.

​Martin Hutchinson on "The Staggering Costs of Bernankeism" : https://prudentbear.com/index.php/thebearslairview?art_id=10688 

ivars · Jul 31, 2012 - 3:05am

Yesterday, GSR in accord with

Yesterday, GSR in accord with silver price development, made quite decisive move towards the uptrend support with a small break for the first time since March, so after straying away and up bit its back quite fast. That is encouraging and there is kind of triple top formation at resistance level 59,07.

At least this chart now is setting up for a serious breakout upwards for silver more and more with each day passing. Can not wait for final decisive turn down as that will allow me to "repair" my longer term silver and gold charts. Its seems initially that , by the character ( flat) of this price movement in silver since May and GSR since mid June, I will just have to stretch a certain period in gold and silver charts=move the same shape forward by at least 2,5 months. However, I have to look into those deeper- perhaps every 1,5 years requires and extra 2-3 month stretch, which would mean the top of silver-gold bubble would move to 2018, which is a bit contradictory to Turd's chart above with comparisons to previous bubble development here :

https://www.tfmetalsreport.com/comment/114384#comment-114384

One may only think that this time, as the price of gold is also signaling certain collapse of current system, no effort will be spared to keep it down=stretch out (keeping it within exponential growth channel borders anyway) , including market rigging and legislative means ( taxation, margins, cash control, limits on possession, other new laws and regulations etc etc ) which will all be made into direction of suppressing the gold price as long and as low as possible against market forces=changing the rules in the market to make gold investments as unattractive as possible thus reducing demand.

So idea that this gold bubble will be ridden out longer than 13 years which signalled the length of Nasdaq and previous Gold bubble might be not so far from truth. Question is, how much longer this road to the peak might last ( I bet 3-4 years=16-17 years till 2017-2018) and what will happen in the meantime with possibilities to acquire, hold, sell physical PMs in each and every country, as well as in the futures market and how the prices for those transactions that will be allowed to happen will be set.

What will take place after this gold bubble collapses is also interesting.

1) Real estate backed money?

2) Phasing out of USD so the price of gold in USD will fall as USD will become more rare ( contracting money supply =deflating US economy- by the way, one of suggested outcomes in E.Griffins book "The Creature from the Jekyll Island" -which I HIGHLY recommend for anyone like me who wants to get fast general understanding of debt based monetary system in a simple and concise way with interesting narrative)

3) else way?

Jan Roos SRSrocco · Jul 31, 2012 - 3:28am

Srsrocco, i think your best

Srsrocco, i think your best bet would be to start your own site and take it from there. Build a following and monetize the traffic from there. I can help you with it if you wish. Just pm me. Cheers, Jan

Boswell · Jul 31, 2012 - 3:41am

Audit The Fed Contact Your Senator Day - S 202

Just got an email "reminder" for this...

https://www.meetup.com/End-The-Fed/

Wednesday, August 1, 2012
8:00 AM - NATIONWIDE!

Call, Write, E-Mail your local Senator and make some noise!

Couldn't hurt.

Greeno · Jul 31, 2012 - 3:41am

Regarding the new money

Regarding the new money system, has anyone considered the possibility that there might not be a metals backed currency in the offing?

Google "Technocracy" and start following the links.

A monetery system based on the Kilowatt hour or some other energy unit could be planned. This would be a killer in expanding the control system and place the 99.9% well under the thumb of a technocratic elite.

G & S would be reduced to whatever arbitrary value the technocrats choose and we'll all be well stuffed.

Have a nice day!

Greeno

ivars · Jul 31, 2012 - 4:38am

Extrapolation of exponential

Extrapolation of exponential channel (log chart=straight lines) of silver within which it sits since 2001 till 01.01.2013 marks the most likely quite wide value range in USD at that date-none of them is bad from todays point of view, even if it trails along the lower border as it has done before- but most likely it will move up from that support closer to the middle. 40-49 looks quite realistic to me-it corresponds to the idea I am slowly cultivating that my silver chart here: https://www.tfmetalsreport.com/comment/521022#comment-521022 showed the final raise 2-3 months too early. I am getting closer and closer to producing a new silver prediction chart, but not there yet. GSR has to clearly top out for that. But basically it (the new silver chart) could say 38-40 in September October, 40-45 in November-December with a pullback to 38-40, peak January-February 2013 at around 60-70 ( very difficult to predict the actual one), mini crash to 40-50 in March -April 2013. After that I will look at gold chart.

From the chart below at 01.01.2013:

Lowest: 35 USD

Middle: 49 USD

Highest:69 USD

Looks good to me!

RRJJ ivars · Jul 31, 2012 - 4:47am

Ivars

Ivars, thank you for your updates and your work on predicting these markets. I have a few new questions for you.

- With this new silver chart, are you abandoning your previous short term target of AG $70-$90?

- Do you take technical chart aspects in to account in your estimates? For example AG of $50 is major resistance and if/when we traverse it we could see a major increase in price!? I'm thinking when we break $50, $70 and $90 might not be so far fetched.

- I saw yesterday that you are expecting one last wave down before the great upleg begins (I agree). But you said you don't expect a fall bellow $26. Don't you think it will be very tempting for the big guys to push the price bellow 26 to hit all those stops there?

Thank you again Ivars! I follow your work with great interest.

RRJJ

ivars · Jul 31, 2012 - 5:29am

@RRJJ

-no, short term target remains the same, but it is very difficult to predict its value at the top when the up move is fast, superexponential. Lately, I have noticed that my charts are too optimistic (I think it has to do with constantly increasing USDx (DXY) and that will dampen the prices all way till US default will become obvious, close reality, which is still some 3-4 years away) so I scaled the top down from 70-90 to 60-70 but that does not exclude possible 90. Perhaps it excludes 120.

-No, but pullback at 40-45 kind of takes that resistance level into view. And there has to be a pullback even if there would not be the resistance there.

- Well, for one thing the only reason I can see silver still moving down a bit is USDx sharp move up, really sharp to 88-89. Otherwise I see no chance it going below 26 . Also , I have learned from professionals who had been so kind to communicate with me, that the story about taking out the stops below 26 is a nonsense, at least so far as it could have been done every time silver went down to test the support with minimal number of sell orders due to small volumes, but that was never done due to profitability reasons, if i have understood correctly. I still see this silver correction as a normal correction form oversell,as:

1) it is staying within exponential growth channel-which means fundamentals ARE WORKING! There is nothing wrong with them.

2) it has retracted to 61,8 % fibo (27) from too SHARP move up from 15 to 49, (Feb 2010-April 2011)

3) and its sitting on natural (former resistance on Dec 2011 in the same move we are still in) support at 26 firmly

Sometimes we ( and me) want to see things we believe in happening faster than they can. TA is exactly a tool to tell us that market has humans behind it on all sides with various degrees of commitment.

S Roche · Jul 31, 2012 - 5:43am

@SRS

Great work, thank you.

Regarding commercializing your work, if you want to do that, why not do it within Turd's site, I am sure there would be a way to keep it in the family and thereby keep the family growing. After all, TFMR has been, umm...kind of good for you and you for all of us.

NancyDrew · Jul 31, 2012 - 7:30am

SRSrocco

Wonderful article! Thank you & Turd for writing in a style that is more easily understandable. smiley

Louie Greeno · Jul 31, 2012 - 7:35am

@ Greeno- New Money

I personally doubt that the new money will be backed by anything except more promises. Having a central bank and the ability to manipulate a currency simply gives too much power to TPTB. If the Euro crashes, the individual countries will just introduce new fiat currencies. If the dollar crashed, they will just introduce the "New Dollar" (N$D). I guarantee that right now less than 5% of the population understands the Federal Reserve, fiat currency and fractional reserve banking. Even after a total collapse of the dollar, less than 10% will understand what has happened to them. I have lived through it before, and the people just exchange whatever paper they have for the new currency and on they go with their lives. 

Not saying we are not at a historical point. The world has never seen a time when so many economies are all in trouble at the same time. Add the drought in America to the mix, and ......

Buy S&G!

NancyDrew · Jul 31, 2012 - 7:37am

Weather Derivatives Being Traded

Now this is a new angle regarding investors & the weather that I had not considered. Quite interesting. I did not feel that this should be posted under conspiracy theories, although I am sure many of you will disagree. If you watch this trailer I believe you will see why I am posting this here......................

Why in the World Are They Spraying?
Geo-engineering and Weather Control


The long-awaited DVD documentary is here, and what a great program it is. Created by Michael Murphy and Barry Kolsky, it is a follow up to What in the World Are They Spraying, the video that has awakened millions of people around the world to the reality that, despite official denials, we ARE being systematically sprayed with an array of toxic chemicals, including aluminum, barium, and strontium. This new program tackles the obvious question: Why would anyone want to do that?

https://m1e.net/c?159448965-ng71am.rs5hVw@7728293-zCp04jfNjTd/USurprisingly, the answers are not difficult to find. The first is that these metallic nano-particles in the stratosphere make it possible to, literally, control the weather, which is a high military priority for many countries, including the US. Scientists are quick to assure the public that their only concern is to combat so-called global warming, but military applications provide the true motivation.

A secondary motivation is strictly financial. In this documentary you will learn about something called Weather Derivatives that are traded on the Chicago Mercantile Exchange. Corporations and a few wealthy individuals are buying hedges against bad weather as a sort of insurance policy to compensate for loss of crops due to droughts and floods. If they can covertly control the weather, they can make a fortune by being able to either cause a catastrophe or avert one, depending on which side of the bet they are invested. There is much more to the story, but this will give you an idea of the scope and seriousness of this inquiry.

'Why in the World Are They Spraying?' Official Trailer

"Why in the World are They Spraying?" Official Trailer
Harald · Jul 31, 2012 - 7:37am

The lunacy continues

GM invests $600 million in Man U.

Yes, General Motors really is giving $600 million to an English soccer club. Actually, as the team involved, Manchester United, is the most valuable team in sports, an investment in the club wouldn't be a bad idea, considering how everything else is going at General Motors. No, the $600 million GM is giving to Man United over the next 7 years is a sponsorship deal. In return, Man United will wear "Chevrolet" on their jerseys and GM will be able to call itself Man United's "global automobile partner." It will immediately have the edge with all those consumers who look to their favorite soccer club for car buying advice. 

U.S. taxpayers are helping pay Wayne Rooney's salary. Kill me now.

From Breitbart.

https://www.breitbart.com/Big-Government/2012/07/30/GM-invests-600-milli...

If this doesn't make one want to go out and buy a few maples, nothing will.

Harald · Jul 31, 2012 - 7:44am

They aren't spraying.

Have you seen anything on this in the New York Times? The Washington Post? Those wacky bloggers, the stuff they dream up sometimes. cool Go back to sleep America.

boatman · Jul 31, 2012 - 7:55am

louie is correct

i can just see the sheeple demanding a 'backed' currency.

not.

they will demand more free stuff........and it will be paid for with more fiat.

this pushes gold/silver WAYYYY up .............

NancyDrew · Jul 31, 2012 - 7:57am

You can't go back to sleep if

You can't go back to sleep if you never woke up in the first place. wink

sebo · Jul 31, 2012 - 8:04am

There's a comment from Frank

There's a comment from Frank Zak regarding this guest post on SGT Report, saying that silver is overproduced.

https://sgtreport.com/2012/07/why-is-the-future-silver-supply-more-at-ri...

The guy claims that he produced the financial statements for 2 of the largest corporations in the world.

He further states this:

"Having spent a great deal of time researching this,
I believe silver is worth $15. I believe gold
is worth $5,000. I believe palladium is worth
$1600 an oz (but would only buy it below $300.)
Platinum is fairly priced."

With my little knowledge I'm not able to classify his statements.

Hope there's somebody out there who is able to find the fault.

Whether it's SRS' or Frank Zak's turn to reconsider their thoughts isn't necessary.

I just want to learn.

Thank you

Eric King · Jul 31, 2012 - 8:07am

Silver chart

Looks to me like its breakout time.

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