Silver Mining Forum General

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#1 Sat, Aug 24, 2019 - 1:40pm
SilverSpec
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Silver Mining Forum General

Hi all,

I'm a new member and I'm getting into a diversified silver portfolio. Throughout the next decade there will be circumstances that fall somewhere between SHTF and the status quo. So let's enjoy the decline and make some money!

I don't really have the inclination nor geological aptitude to research juniors with any valuable insight, but I am looking at established companies with a current 100M+ market cap.

I had a few questions if anyone here can help out a newb.

1) Any thought about recent developments in Argentina and the risks for PAAS and SSR? Will PAAS ever be able to get Navidad off the ground?

2) Risks for Mexican operating companies? I realize there is the new rebranded free trade agreement in the works. Is Mexico a 'safe' jurisdiction with the new Obrador government. How much jurisdiction risk is tied to MAG, FR, and EDR?

3) Would anyone have any idea on the break through AISC prices for HL to end the strike and for AXU to develop Keno Hill? These seem like attractive projects and would tilt my portfolio heavy NA because of attenuated jurisdiction risk and more stable currencies. I imagine the AISC is also higher for these projects because labour costs are so much higher in North America. But I look at the grains/tonne at the Canadian and US projects and my eyes get green.

4) Would silver streamers like WPM move sideways in a global economic downturn? It's great they have the purchase agreements, but if the market value of copper and zinc decline substantially, they can't stream it if it doesn't come out of the ground.

Obviously all four (SA, Mexico, NA, streaming) would be part of a balanced silver portfolio. Just wondering how you all personally balance these factors to profit from the coming insanity. Would really appreciate your advice and insight.

Thanks,

SS

Sat, Aug 24, 2019 - 3:30pm
Libero
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Nice thread silver spec

I know alot about Hecla, suffered being a bagholder for way too long. But I just can't lose hope. It has a lot of great mines and Lucky Friday (not lucky at all) will be spitting silver like crazy once it goes online again. They added a shaft that cost a lot, but has never been put into use. Now that silver is over $17, I expect it to be quite profitable. For the life of me, I don't know why mgmt. couldn't settle with union. But... on the positive side, they didn't mine ore when silver prices were so low. Prices around $1.70 look good to me.

Endeavor Silver (EXK) has good prospects going forward with their new Teronerra mine.

Great Panther (GPL) is now more a gold mine than a silver. It's been beaten down because of worries they over extended themselves with purchase of Tucano (in Brazil where fires are raging). This company can move big time.

Paas is Pass, a great company, pays a dividend, and if their acquisition of Taho's Escobal mine in Guatemela ever gets permitted (again), they will be rolling in silver.

Anyways, do your diligence and don't put all your money in at once.

Sat, Aug 24, 2019 - 5:05pm
zman
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SILJ

https://www.etf.com/SILJ

Might be a decent way to play it. It has underperformed, but if silver moves higher it should provided some decent leverage.

Sun, Aug 25, 2019 - 8:35pm Libero
SilverSpec
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Great insights Libero!

Looks like I'm on the right track, and you've helped me fill in some gaps. It's my conjecture also that Hecla was putting off the strike-resolution until the profit incentive was there -- it's like teachers striking in the July.

I had a call with Endeavour last week and Terronera has received approval. The investor relations personnel said that it should get into production 2021-22, so major potential there.

Can you elaborate on Escobal? My understanding was that Tahoe security shot some protestors? I saw that the lawsuit was resolved, however. I see that they're sitting on ~560Moz of silver.

I take your point, but you sophmores need to realize that young guns like myself are entering the space, signing up to TFMR and looking for the contrarian trades in a down market. Cheap buying opportunities will be evaporating soon, if tonight is any indication of where we're going - and the fed still has 8 25bps cuts to go (and BoC 7)...

Sun, Aug 25, 2019 - 8:39pm zman
SilverSpec
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Thanks for the advice

Thanks for the advice zman. An ETF would definitely be idiot-proof for the novice. At the same time, I don't like leaving money on the table if I can be reasonably certain the market isn't accurately pricing-in when major silver projects will or will not become viable.

I remember studying for CFA 1: "Markets are neither efficient nor inefficient" hahaha

Fri, Aug 30, 2019 - 8:58am
Robertoe
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Royalty Companies

Hi Guys,

Just pitching in here. Has anyone had / have thoughts on Royalty Companies. The reason I ask - A week or two ago (I wish I could find the post) someone posted a comment along the lines of "I have invested in the PM stocks during two bullmarkets. On reflection if I had just bought Royalty companies I would have made the same amount of profit as from investing in miners, explorers, developers - but with none of the stress / fun". I wish I could find that comment and which member posted it.

However, what are your guys view on the small pool of Royalty companies? I own Sandstorm, Wheaton, Franco Nevada and have just bought Royal Gold.

Cheers,

Rob

I do like to dodge bulls

Fri, Aug 30, 2019 - 7:28pm Robertoe
anarchitect
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re: Royalty Companies

Hi Robertoe,

I think you were referring to my post on August 15th:

https://www.tfmetalsreport.com/podcast/9625/tfmr-podcast-thursday-august...

I just happened to stumble across your post, because I've hardly ever looked at anything outside of the normal daily threads that Craig creates! But when listening to today's podcast, I noticed this topic on the right side of the web page and...

If you have any questions, I'll try to remember to revisit this thread.

Tue, Sep 3, 2019 - 12:37pm anarchitect
Robertoe
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Anarchitect

Thanks for responding to the thread / my question. From reading your post you have a wealth of experience in a PM bull market. I am too young to have participated in the last one. A quick question. In terms of understanding the sector do you have any advice in terms of; a book you would recommend / other websites that help scrutinise PM stocks or other insights into how you are currently invested (although admittedly you covered that off in your post). Are you now more sanguine / cautious in your investment (for that read speculation - as ultimately in this sector we are not really investors).

I do like to dodge bulls

Wed, Sep 4, 2019 - 7:30am Robertoe
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re: Advice

I'm certainly positive on the metals and the sector right now, but I'm also more cautious than 10 or 20 years ago because I'm older and don't want to return to work. But back then, being well overweight in the metals and miners was what allowed me to retire early. How much risk to take is something that only you can decide for yourself. The more certain you are that you would still have income even after a significant downturn in the economy (or Brexit, should the doomsayers prove correct), the more risk you might be willing to take. But what would happen if you had no income for a year?

The bullion aspect is easy: just buy some Britannias, gold and silver, and CEF/PHYS/PSLV in your brokerage accounts. I don't know of any books that would help you navigate the mining sector. There are quite a few websites and newsletters out there, but I'm reluctant to recommend any because each has its critics. Some are shameless promoters who get paid to write up a stock, and others can be somewhat expensive, say $2,000 a year. Unless you have enough money to speculate on a basket of juniors, so that you're likely to have a couple of big winners that make up for the losers, you'd probably be better off staying with proven names, like the royalty companies and miners that are profitable even at a lower gold price (e.g. Kirkland Lake, Wesdome, Agnico-Eagle, Barrick).

Wed, Sep 4, 2019 - 10:56am anarchitect
Robertoe
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Thanks Anarchitect

Thanks for taking the time. More good advice, much appreciated.

I do like to dodge bulls

Wed, Sep 4, 2019 - 12:56pm Robertoe
SilverSpec
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Book Reviews

I finished both David Morgan's Silver Manifesto and Second Chance last week. I'll be uploading summaries and book reviews this week. In brief: the first book deals with fundamental analysis; the latter deals with selling paper silver into strength with technical analysis.

In 2016, David Morgan suggested having a core position of 1-2 streamers and 8-12 stocks to navigate the secular bull. This is to navigate risks associated with poorly managed companies and geopolitical risk (mine nationalization). Streamers/Royalty companies are good for this reason, however, because their silver revenue largely comes from byproduct mines, one needs to do the cost/benefit if there is a market downturn in copper/zinc/lead.

Furthermore, highly leveraged companies are more likely to outpace streamers. Some companies, for example, have very high betas to silver price (they are only economic with sufficient silver price because their AISC/oz are so high). These companies can be expected to outperform streamers if/when silver surpasses $25/oz (or some other arbitrary threshold). You want your portfolio to be large enough to capture the outperformers.

Wed, Sep 4, 2019 - 1:15pm
SilverSpec
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Minutiae

I would also add that the more granular one goes, the easier it is to pick winners.

Alexco, for example, has an environmental side-hustle and is sitting on a bunch of high-grade silver in a very safe jurisdiction, but also has very high AISC with the CEO hinting somewhere between $20-25oz.

Production developments like Escobal (Pan Am), Juanicipio (MAG/Frensillo), Navidad (Pan Am/Wheaton), Corani (Bear Creek), Terronera (Endeavor) and Lucky Friday (Hecla) mines all have material ramifications for stock valuation.

Thu, Sep 5, 2019 - 9:29pm
SilverSpec
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David Morgan and Chris Marchese's The Silver Manifesto

In the last week I read David Morgan and Chris Marchese's book The Silver Manifesto. While the book is 4-5 years out of date, a lot of the information remains relevant as many projects wear put on pause below the AISC during the two cyclical bear markets since the 2011 peak. Since the book was published, many companies have been bought out as the industry consolidated. The production, development, and exploration companies that are still operational are those which can break even at $14/oz or whom are sitting on a massive measured and indicated silver deposit.

Below are my thoughts by chapter. A lot of the information is redundant for those familiar with the history of fiat currency or have a foundation in austrian (sound money) economics.

Chapter 1: A Monetary History of Silver, 3,400BC-1792AD
In short, silver has been used for small transactions since ancient time. Every time fiat currency has been introduced, those in charge of monetary policy debase, leading to a loss of trust in the currency. The Chinese have experienced multiple episodes with fiat currency failure over the last millenia. The chapter is interesting for those who find monetary history fascinating. The authors curiously do not mention the Byzantine empire, which I understand had a metal standard for several centuries.

Chapter 2: A Monetary History of Silver in America (USA)
Silver as constitutional money. USA moved to a gold standard in 1873 ('the crime of '73'). Three central banks: 1791-1811, 1816-1836, 1913-. Nixon closes gold window 1971 (not sure if mentioned in book). Silver removed from coin circulation.

Chapter 3: Silver Supply Dynamics
2012-14 average production
primary silver mines: 24.8%
primary copper mmines: 24.6%
primary lead and zinc mines: 37.3%
primary gold mines: 13.3%

Primary l&z production projected to fall as Perseverance and Brunswick are being (have been?) depleted.

2021-23 average production breakdown
primary silver: 33.3%
primary copper: 25.1%
primary L&Z: 33.0%
primary gold: 8.6%

Primary silver start ups 2015
Gaocheng, Rosario, Saucito II (Fresnillo), San Julian (Fresnillo), Pulacayo-Paca (Prophecy Development), Fresnillo Exp., Flame & Moth (Alexco), San Sebastian (EDR), Avino Exp. (Avino S&G mines), San Felipe (America Silver Corp), Fuwan, Pyrites Plant (Fresnillo), La Preciosa (Coeur), Santa Ana (Bear Creek), La Joya (First Majestic), Bulldog (?), Pitarilla (SSR), Juanicipio (56% fplc/44%mag), Gavilanes (Santa Cruz Silver), Mangazeisky (Silver Bear Projects Russia), Hackett River (Glencore/Sandstorm), Hermosa (Wildcat Silver), Rockcreek (Hecla), Navidad (PAAS/WPM), Corani (Bear Creek), Montanore (Hecla), Bowdens (Bowdens Silver Project Australia), Malkhu Khota (abandoned by South American Silver after conflict with Bolivia), Metates (WPM)

Monsters: Escobal (PAAS), Saucito II (Fresnillo), San Julian (Fresnillo)

Mini-monsters: Fresnillo expansion, Cienega expansion (Fresnillo), Pyrites plant (Fresnillo), Juanicipio (Fresnillo/MAG), Fuwan, Del Toro(First Maj), La Preciosa (Coeur), Santa Ana (Bear Creek), Corani (Bear Creek), La Pitarilla (SSR), Pascua-Lama (Barricks/WPM), Hackett River (Glencore), Montanore (Hecla), Bowden's (Bowden's), Malku Khota, Hermosa (Wildcat), Metates (WPM), Prairie Creek (Canadian Zinc Corp)

Megas: Penasquito (WPM), Cannington (Australia, byproduct 25moz/a exhaust 2025, peak silver 2019), Fresnillo, Dukat (Russia gold), Escobal (PAAS), Rudna Copper (KGHM Poland), Hycroft (Allied Nevada), Pascua-Lama (WPM), Navidad (PAAS/WPM), Metates (WPM)

Large: Juanicipio (Fresnillo/MAG), Antamina (Teck Resources /BHP /Glencore /Mitsubishi), Oyu Tolgoi (Rio Tinto Mongolia), Pallancanta (Hothschilds), La Pitarilla (SSR), Polkowice (KGHM Poland), Uchucchacau (Bonaventura), San Julian (Fresnillo), Mina Ministro (Hatch), Lubin (KGHM Poland), La Preciosa (Coeur)

Medium: Toromocho (Chinalco), Saucito II (Fresnillo), Palmarejo (Coeur), Pirquitas/Puna (SSR), San Dimas (FR/WPM), Gumuskoy, Corani (Bear Creek), Del Toro (First Majestic), Mt. Isa (Mt. Isa Mines), Chunger (Volcan), La Colorada (PAAS), Zhezkazgan (Wood Mackenzie Kazakhstan), San Jose (McEwan/Hothschild)

Thu, Sep 5, 2019 - 9:35pm
SilverSpec
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The Silver Manifesto

Chapter 3: cont.
Mexican Royalty Tax: 0.5% on total revenue, 7.5% revenue tax on EBITDA (earnings before interest, taxes, depletion, depreciation, and amortization)

Two measures of profitability: operating cash flow (net operating profit plus DDA minus sustaining capital investment); free cash flow (operating cash flow minus capital investment)

Nota Bene: Energy accounts for 20-25% of op costs.

Cash Costs
Mining
Processing
Labour

Total Costs
General Selling and Administration
Interest Expense
Other Royalties
Corporate Taxes
Sustaining Capital
Exploration Expense on Producing Properties
*(MX) 0.5% on total revenue
*(MX) 7.5% revenue tax on EBITDA

Silver Price*Production = total revenue
Lowest half of industry is $20-22/oz
Lowest quarter of industry is $16-19/oz (Fresnillo, Avino, Tahoe)
Industry as a whole has AISC well above $25/oz (few dollars lower for byproduct mines)


Peak Silver? I found this one of the more interesting questions in the book - could we be looking at a supply glut in the next decade? I would be interested to know if DM has updated his projections with the new cyclical bull he didn't project (2016-2019) and new projects (or lack thereof) since then.

What impacts forecast?
-Mine Permitting
-Various Geopolitical issues
-Financing economics (metal price vs rising capital and op costs)
-projected 936moz-1028moz peak between 2021-2023

-Annual mine production of G:S has been 9.6-9.9:1 for 2011-2015
-Silver performs better in an inflationary environment; gold in a deflationary environment

Chapter 4: Silver Demand Dynamics
Silver: highest electrical conductivity and heat conductivity of any element

Rothbard's True Money Supply
Currency Component of M1
Total Savings Deposits
Total Checkable Deposits
Demand Deposits and US Note Balances of the US Govt
Demand Deposits due to Foreign Official Institutions
Demand Deposits due to Foreign Commercial Banks

Industrial demand inelastic; investment demand elastic. Silver price may induce behavioural change around $60/oz, but because so little silver is used for electronics/appliances/batteries relative to the cost of the final product, the marginal cost has little impact unless price rockets higher.

Thu, Sep 5, 2019 - 9:50pm
SilverSpec
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The Silver Manifesto

Chapter 5: Money & Banking
This chapter pretty much lays out that fractional reserve banking creates the possibility for maturity mismatching and bank runs.

Chapter 6: Intervention Induced Price Suppression in Silver in Gold
TF has pretty well explained in Sprott articles that futures artificially create supply through fractional reserves. This chapter pretty much explains how Bullion Banks operate.

Bullion Banks borrow Gold from Central Banks or other large depositories at some artificially low interest rate (we borrow 100lbs of gold, we'll give you back 102lbs of gold in 12 months). They sell the 100lbs of gold onto the market and then engage in arbitrage by buying save-haven fiat assets like US Treasuries. They take the interest (say 4%) from the T-bonds, buy the 102lbs of gold back on the market.

This obviously creates a problem for the bullion banks if bonds are bid up and the price of PMs is rising... The arbitrage disappears and BBs are short-squeezed -- they have to buy back the physical on the market to cover positions.

Roughly half of CB gold was on loan in 2000.

Chapter 7: Austrian Business Cycle Theory
Chapter 8: Monetary Malfeasance
Chapter 9: The Debt Bomb
In short, chapters 7-9 explain that the economy is fucked and unsustainable. I think it is important to remember that sound money does introduce some market distortions, but that it is the least distortionary of any tested monetary regime up until this point in history. While it is certainly preferable to the fiat alternative, in a sound money economy, you have countless man-hours digging holes in the ground to liberate money from the earth. This is energy that could be used to produce food, spend time with loved ones, pray/meditate, or build a house. How many young men have died in a hole over the centuries on the offchance they strike it big.

I haven't seen this point acknowledged in any PM space I've visited over the last 16 months, but I think it is valid. On balance, sound money is just the best economic framework developed thus far, but it does come with a cost of lives, energy, and leisure to have a trusted means to facilitate transaction.

Thu, Sep 5, 2019 - 9:56pm
SilverSpec
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The Silver Manifesto

Chapter 10: Building a Precious Metals Portfolio
Chapter 10 demystified a lot of the acronyms I see thrown around here. It was a great orientation to the various tools (core and surgical) that individuals can use to profit in a bull (and sometimes bear) market. The backwardation/contango analysis was also insightful to try to identify when there is a physical supply shortage and the squeeze is on.

Starts with physical metal. Authors suggest minimum 10% but 15-20% is better in current climate. For the aggressive investor, investing in one or multiple streamers is best foundation for outsized returns.

Types of Royalties
Net Smelter Returns (revenue determined from a mine's operation).
Net Profit Interest(becoming less popular as op costs have risen)
Net Royalty Interest (op profit minus capital costs)
Streaming (upfront interest payment, receives % of given commodity from the mine at pre-agreed rate)

5 Types of Mining companies
-Royalty Company
-Senior Producer (more than 10 moz/year) (800k-1moz gold)
-Mid-tier (4-9.9 moz/year) (250-999koz gold)
-Junior (less than 4m oz/year)
-Exploration/Development

Exposure to Mining Equities: ETFs
GDX - top tier and mid-tier gold producers
SGDM
SIL - 27 silver miners
SILJ - junior miners and developers

Exchange Traded Products
ETNs (Exchange Traded Notes)
SLV - mirrors silver price in paper
Central Fund of Canada (CEF)
Inverse ETFs and leverged 2-3x inverse ETFs
Sprott Physical Silver (PSLV)
Leveraged ETPs
-DGP: Gold Double Long
-AGQ: Ultra Silver (2x Long Silver)
-USLV: Ultra Silver (3x Long Silver)
-NUGT: Direction Daily (3x Long Gold Miners)
Options
-right to buy (call) or sell (put) at a given (strike) price
-long call: right to buy specified asset at a given price on or before a given date
-Buying a call and/or put
-Writing a call and put
-Going long and/or short common stock/ETF
-Long and/or short a futures contract
-Buying a call and/or put on futures
-long put: the right to sell an underlying asset at a specified price on or before a given date
-short call: selling the right to buy an underlying asset at a certain strike price
-short put: selling the right to sell an underlying asset at a certain strike price
-covered calls

Futures Contracts
Obligation to buy or sell a specified quantity of units at a specified price on a predetermined date
Future Option Calls

Prices of future contracts can reveal a coming rise in the price of a commodity. Backwardation is when the price of a commodity is higher now than in the future. Contango is the opposite and normal condition. If backwardation is meaningful, prices almost always rise in the near future.

Meaningful = excess yield > 10% going out 3 mos.
F - Price of Commodity in the future
S - Spot Price
T - Time (years) before expiration
r - interest rate on a T-bill going out T
C - convenience yield
C = r - [(1/T)*ln(F/S)]

When market is getting tight: 1-mo >25%, 3-mo >= 15%, 4-6mo >=8%

Warrants
Right to buy a stock at a fixed price until expiration.

Thu, Sep 5, 2019 - 10:08pm
SilverSpec
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The Silver Manifesto

Chapter 11: Mining Stock Appraisal
In Chapter 11, the authors get to how to identify winners. Like I acknowledged in the first post in this thread, if a mining company is still standing after two cyclical bear markets, odds are it is both well capitalized and has low production costs. That being said, this chapter introduces a number of analytical tools to evaluate how solid a company is and encourages the reader to crunch the numbers. I personally found the idea of the NAV calculations valuable: looking at each mine, the annual production, the capital expenditure, the discount factor, and present value as a framework. It is a lot of math, but it's the idea of looking at production versus a company's market cap and fully diluted shares. At what $/oz are certain companies going to rise relative to others?

Valuation is an art not a science. Best USA state for mining is Nevada. Safest mining jurisdictions are: Mexico, Canada, Nevada, Australia, Chile, Peru, parts of West Africa (Ghana). (Note that they do not include Argentina and Bolivia on this list)

'MAG' Test
Management - Strong management team with proven track record
Assets - High quality assets: including upside potential, low cost, one or two assets to build a company around
Geopolitics - Cornerstone assets in geopolitically stable regions

Management
Who are the COO, CEO, CFO. Where have they previously worked. What is their track record?

Financial Position, Profitability, Capital Structure
-Strong liquidity and solvency position
-Strong operating cash flow generation (on a relative basis)
-Reasonable share structure

Current ratio: how many times assets cover liabilities (2x minimum)
Acid test: (cash and equivalents + short-term investments)/current liabilities (positive)

Interest coverage: Earnings before interest and taxes EBIT/interest expense is more accurate than EBITDA/interest expense in capital-intensive industry.
A strong ratio is 10x. If a company has a large cash position, it is less important.

Non-cash working capital should always be positive
(inventories + accounts receivables + other current assets)
- (accounts payable + notes payable + short-term debt + current maturing position of long-term debt + accrued expenses and liabilities + other current liabilities)

Debt/Equity
[current debt (due within a year) + long-term debt]/ market value of equity

Total assets/Total liabilities
Healthy ratio is anything over 2-2.5x

Operating Cash Flow: (net operating income + depletion/depreciation/amortization - sustaining capital)
Net Operating income: (net income +/- one-time expenses + write-downs/impairment charges)
Free Cash Flow: (net operating income + dda - gross capital investment)

Quantitative Analysis
Determine personal rate of return on an investment, perception of risk, and appraisal of opportunity costs.
Production growth rates of the company's assets going out as far as possible as well as capital expenditures required to bring a mine into production.
AISC for the company

Also important:
Gold/silver price

Discount rate: R(f) + [Mrp(B)-R(f)]
R(f) - risk-free rate of US Treasuries
B - volatility of stock relative to total market index
Mining companies typically 1.6 (relative to market, which is 1)
M(rp) = annual market return (7-9%) -- cost of equity (Ke)

Suppose also company has debt (bonds)
Take the interest rate that the bonds are yielding.
t - tax

(We)(Ke)+(Wd)(Kd)(1-t) = WACC (weighted average cost of capital)
Book suggests 8.4% required rate of return

Determine AISC and production per mine to determine NAV.
Almost all companies provide a best-case scenario. Prudent to take 80-90% of mill rate, grade, hours of operation

2P - resources known to be economically feasible for extraction
Measured - indicated resources that a "competent person" has declared them to be an acceptable estimate
Indicated - sample from which a reasonable estimate can be made
Inferred - that which can be estimated with a low level of confidence

65% of inferred; 85% measured and indicated as conservative approach
Most conservative approach is to only use 2P for life of mine calculation.

NAV = Cash + Mine production*(silver price)
NAV / Share = NAV/ FD Shares

Higher cost mining companies have greater leverage to the underlying metal. Should the underlying metal appreciate, the higher cost company will see its margins improve a great deal more.

2 other metrics
1. Earnings Per Share * (7*(1.65*[5-7 year growth rate]))
2. EBIT/Enterprise Value (market price * shares + cash) --> quality of earnings

In conclusion, I found The Silver Manifesto very useful tool for orientation to the mining space. I would strong recommend shelling out the $10 for the Kindle, if not for the history, then for chapters 3,6,10 and 11.

Thu, Sep 5, 2019 - 10:20pm
SilverSpec
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David Smith and David Morgan's Second Chance

While The Silver Manifesto looked at the fundamental analysis of the silver market and silver mining companies. David Smith and David Morgan's Second Chance looks at how to use technical analysis to time the next secular bull. They point out on a couple occasions that if one is a prepper, this is a moot issue. But then again, the world may not implode overnight. Maybe it will be a slow-boil. If this is the case, why not take a paper silver position, ride the bull wave up, then leave the party before it peaks? Use that extra fiat to buy a house, buy guns, buy 400lbs of rice etc.

The book could probably be aptly named Third Chance. It is obvious that the authors did not predict another cyclical bull market 2016-2019. As a result, a lot of loose hands have been shaken out over the last decade. As a younger person in the PM space who hasn't had to suffer over the last decade, this has (fortunately for me) created ample buying opportunities. My investment horizon is longer, and I can wait years for the next bull. The price can only remain low for so long until mining supply becomes uneconomic and there is a physical short squeeze -- but anyways onto the book.

Chapter 1: The Case for Silver
Silver is not presently in a shortage. Approximately 2-2.1Boz investment-grade silver above ground. 90% of the move in silver happens in 10% of the time.

Chapter 2: Is it different this time?
"The coming 3rd and finally parabolic stage will end in the destruction of small, inexperienced new traders & investors who will be subject to blind greed and frenzied panic". Build liquidity with your dealer: you need someone with whom to buy your metal. The silver price peaked at $50 for one day only.

At current, authors looking at what gold and silver will buy in terms of real estate, oil, a major stock index, an automobile, or some other tangible good.

Every time there is a financial panic, fear drives the decision-making process. All of this seems unimaginable, because it has rarely occured in history. Since these outlier events usually skip generations, there is little "retained memory" by the people. Authors believe it is more likely that financial elite reintroduce backing of currency with precious metals.

Chapter 3: Keeping it Simple: Insurance vs. Profit
1st: Hold in your hand metal
2nd: Substantial profit from physical metal

Thu, Sep 5, 2019 - 10:23pm
SilverSpec
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Second Chance

Chapter 4: Catch and Ride the Wave
1. Understand, Implement and Flow with Boyd Cycle (Observe, Orient, Decide, Act)
2. Study and Apply both Fundamental and Technical Analysis
In authors' considered opinion, the height from which prices will fall, will have printed an historic figure in both nominal and inflation-adjusted terms well into three digits.
Moving average convergent divergent (MACD)
Most common are 50d and 200d. Solid uptrend when 50 is above 200 and both are rising.
50 crossing 200 is referred to as death cross, but can often whipsaw
Longer term MAs are deemed to have more confirmation value
3. Institute and Follow sound Money Management 101 Principles
Build a core of as few as 10 or 12 of the brightest mining stocks, plus a streamer or two, and maybe a prospect generator. If a company blows up, gets nationalized, or starts underperforming on an intermediate basis, fire it and find a better story.
You MUST hold the Core until you believe the secular bull is turning over or a major cyclical bear is underway.
We posit that if you intend to achieve 10x or more portfolio growth during this cycle, you're going to have to leave "well enough alone" -at certain times- and with certain elements of your stock position.
Just say no to selling core positions - create most of the action using satellite holdings.
Three major legs up. The third and last leg offers the potential for as much as 80-90% of the bull's profit potential... Which becomes available during the last 10% in time of the entire progression.

Stop-Market: a price that becomes a Market Order when touched
Stop-Limit: a price which when activated, will only be filled at that amount or higher.
Avoid going all-in on any one company, regardless how amazing it looks. You will be able to survive a number of financial hits to companies that underperform, get nationalized, or blow up.

3 Important Trading Behaviour Traits
1. As account balance grows, do not keep allocating the same percentage to a given stock that you did when it was smaller.
2. Sell permanent losers
3. If you have determined you have made an offset mistake, don't keep making it.
*Mining shares come into their own late in the bull-market cycle.

Chapter 5: A 10x your money precious metals' battle plan: part 1
-miners tend to rise 3x faster than precious metal.
-miners can advance for some time after the metals do before topping out
Primary purpose of the book is to design a plan that keeps you invested for as long as possible during the run-up into a trading mania, offers an 'early out' with the majority of your winnings, and helps you to hold onto a 'stay in the game' vehicle

(3-5-8x) phase markers
Even at $125/oz silver, it would still be cheaper in inflation adjusted dollars than it was at its peak in 1980.
Don't believe the government going to do something until they officially deny it. Expect it to occur immediately after the 3rd denial.

Thu, Sep 5, 2019 - 10:26pm
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Second Chance

Chapter 6 mirrored a chapter in The Silver Manifesto and explained a lot of the paper vehicles out there to get exposure to the mining price.

Chapter 6: part II
SLV - cannot take delivery, can be sold short, may not have the silver it claims, better ways to invest in silver
-helpful for institutional investors
-SLV shares directly translates directly into a drawdown of physical silver supplies
-350 moz, custodians take 0.5% fee bullion etfs expected to track price more closely than ETFs holding futures contracts
Contango is normal method of futures contracts. If a commodity trades in backwardation, it may mean near-term supply/demand equation is in question.
CEF - closed-end fund, number of shares at a given moment are fixed
share price may trade higher or lower than NAV
GLD - each share represents 1/10th of an gold ounce
Look at ETFs as tactical instruments with short to intermediate term holdings, not core positions.
ETFs make up about 25% of daily equity trading
Inverse ETFs - surgical trading tool
ZSL - shorting silver
GLL - shorting gold
ETFs are just buying price exposure.
GDX - 50 gold miners (including those on HUI)
GDXJ - 48 junior gold and silver miners
SIL - 22 silver miners with geographic exposure
SILJ - 24 junior producers and explorers

Cautionary tale - WITE ETF was terminated

Sprott Physical Trust Silver (PSLV) - backed by physical silver; traded at premium of 7-23% NAV
Leveraged and inverse metals' ETPs
AGQ - 2x silver price exposure (limit-order unless one has access to real-time quotes)
USLV - 3x silver price exposure
UGLD - 3x gold price exposure
GLL - short silver price
NUGT - 3x gold miners
DUST - short gold miners
JNUG - 3x junior gold miners
JDST - short junior gold miners
ZSL - ultra-short silver (buy an extended range break out; for use at suspected intermediate tops)

ETF advantages
-increase portfolio returns
-increase resource sector trading flexibility
-multiply profitability of underlying metal move
-minimize effect on overall portfolio
-enable single trade on number of companies (brokerage fees)
-offer time to concentrate on core holdings
-mental compartmentalize core holdings

ETF drawbacks
-highly specialized trading tool
-for most investors/speculators, trading into or against major trends will be more complicated than it is worth
-counterparty risk
-fees

Chapter 7: Trading Canadian Miners on the Pink Sheets
In 2004/2005, bets could have been made on either side that Aurelian would make a significant strike in Ecuador. There was some important probability clues. One could have build a case by digging deep on the the company's website.
For junior miners, there is a case to be made to get in right after a major discovery, ride the wave upwards, but then unload before it gets taken over by a major. After a strike, 2-3 years for the company to build "a big deposit".
Only 1 in 5,000 exploration companies hit the big-time.

Thu, Sep 5, 2019 - 10:28pm
SilverSpec
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Second Chance

The next couple chapters dealt with when to exit your position, how much, and when.

Chapter 8: Good-bye Mr. Market: The Case for Leaving the Party Early
To know and not act is the same as not knowing. Professionals strive to buy in the bottom 20% and sell in the top 20%. What if silver runs to $400, but the retreats and stabilizes at $50? You're leaving a lot of money on the table.
Look at a company's price range over 20 years, and by application through example, construct and "back test" a paper trade position using these numbers which would "float your boat" in the stormy price seas through which this stock sailed before it almost foundered, and was finally bought out.

Moriarty: It makes a lot of sense to take money off the table when you can. Have a plan. Have any plan, but take some money off the table. If you don't walk away while you are winning, the only alternative is that you are walking away when you are losing.

The premise of this chapter is that relatively few investors who buy gold, silver, and the miners, during this long-term secular bull market -- especially from here on in -- will be able to both make AND KEEP a significant amount of money.

Even sound analysis can reach an incorrect conclusion when a paradigm shift takes place.

Island reversal: one or two day price range that trades beyond the price action on either side, leaving price gaps. In a top area, prices gap up, trade for one-three days, then gap back down.

If gaps are not filled within a few days, it is highly probable, at the very least that an intermediate top is in place.

Prices tend to fall several times faster than they have risen.

One way to begin position by setting up a line of orders to buy at limit good til cancelled (GTC)

Decide now how much is enough
ETFs seldom make a good choice as a core holding or a long-term trade position. Mental or actual stop-loss protection is highly recommended.

What is my exit strategy?
When making an investment, people generally only think about where to buy, without much consideration about when, how, or even if they might sell. Our idea is to set things up so as to be able to make and keep a substantial profit.