Can the Primary Miners Survive $18 Silver?

Thanks to the wonderfully functioning rational markets that we have today, at current silver prices virtually all of the primary miners are now below net income break-even.  I say this with a great deal of sarcasm because in fact there is nothing rational about the markets today.

It becomes increasingly frustrating to watch the television and read on the internet, some of the worst analysis from what is a supposedly, an intelligent species.  When I was growing up, I actually thought the people in government, news anchors and financial commentators actually knew what they were talking about.

However, there is little in the way of truth being broadcasted over the airwaves today.  In all actuality, the Main Stream Media has actually convinced the public (presently) that GOLD IS GARBAGE… AND GARBAGE IS GOLD.  By garbage, I am referring to most paper assets.

We can witness this by the Grand Charade currently taking place in the paper gold and silver markets as the charlatans, gadflies and nitwits proudly proclaim that the ‘Great Gold Bull Market” is in fact… OVER.  Even though they may have bamboozled some of the weaker hands as well as the majority of the clueless public… the fundamental bull market in the precious metals has only just begun.

Unfortunately, the majority of the world has no idea of the real power of owning gold and silver due to the breakdown and failure of the analyst community.  Here are a few of my thoughts on the role of a proper analyst.

First and foremost, the world is awash in lousy analysis.  It doesn’t matter from which sector or what industry, the ratings-analyst community is like a dead fish, rotting from the head down.  There is plenty of evidence of this, but due to the short-term attention span of the investing public, the sins and errors of the Wall Street analyst community for the most part, are largely forgotten.

Second, for analysts to provide accurate forecasts, they need to base their work on root fundamentals.  Today, very few analysts create forecasts this way.  The overwhelming majority are providing reports derived from a sea of conflicting and superficial data.  That being said, I really don’t blame them as they are producing forecasts respective of the very world and markets in which they live.  As they say.. Garbage in, Garbage Out.

Lastly, the most important fundamental is unknown by most analysts.  I do not claim to be a gold or silver bug.  Even though I may be passionate when I write posts and articles defending the precious metals, I try to base my work on fundamental logic rather than emotion.  While some of the more proficient precious metal analysts write excellent articles about certain fundamentals, I believe there is one that has been completely overlooked — and this is by far the most important fundamental.

Before, I get into explaining this key fundamental, let’s explore how the extremely low (manipulated) paper price of silver has impacted the miners.

How $18 Dollar Silver Impacts the Primary Miners

I don’t believe there is one precious metal analyst who thought silver would fall from $32 in the beginning of the year to the $18 level today.  Sure, there are always a few eccentrics who proudly proclaim they saw this coming for years, but while they may have got the call right, they did so for the wrong reasons.

To be able to understand how $18 silver affects the miners, we have to figure out what break-even is for the individual company and the industry as a whole.  My first attempt at calculating break-even was presented in my article The Complete Cost of Mining Silver.  The article was a bit simple and rudimentary, however it tried to show how certain metrics like cash costs can be completely meaningless in determining the profitability of a company.

To be able to expand on my net income break-even analysis and to see if it would pass the smell test by the accounting profession, I contacted one of the more prestigious schools of accounting in the nation and asked for assistance.  After a few email exchanges with some of the professors at the college, my email address was forwarded to one of their colleagues who was at one time a CFO of a gold mining company.

Within a few days, I received my first email from this individual and for the next several weeks we corresponded on different aspects of mining accounting.  To make a long story short, there were some important agreements of my methods by this professional as well as some objections.

However, when I first sent my Excel spreadsheets showing my work on net income break-even on a few of the silver miners, the response I received from this ex-gold mining CFO was, “Your approach makes perfect sense, which is probably why it has never been embraced by the precious metal industry.”

You can’t believe my elation once I opened the email and read that sentence.  Again, it turns out that we differed on certain aspects of mining account that will be addressed in future articles.

If we look at the table below we will see the top 12 primary silver mining companies Q1 2013 financials and break-even (minus Fresnillo and Hochchild as they state the financials every half year):

TOP 12 Silver Miners Total Figures & Breakeven

As we can see these top 12 primary miners received nearly $805 million in total revenue from selling 20.3 million ounces of silver as well as by-product metals.  If we look at the sales that came from the by-product metals, it turns out to be $255 million or a surprising 32% of the groups total revenue.

One of the issues I have with the present method of accounting in the mining industry is what is called as “by-product accounting.” For instance, cash costs are figured by taking all of the company’s by-product metal and subtracting it from the overall cost.  So, if a company has 45% of by product metal revenue (credits) and they deduct this amount from the overall costs to show a “Very Low Cash Cost”, they can do so while at the same time stating a net income loss for the period.  This is the insanity of cash cost accounting.

To get the net income break-even for the entire group, we take the total net income and divide it by the silver sold:

NET INCOME $90.7 mil / SILVER SOLD 20,366,789 oz = $4.45 net income per oz

If we take the $4.45 net income per oz figure and subtract if from the average realized price of silver the group received that quarter we get the following:

REALIZED PRICE $29.85 – NET INCOME PER OZ $4.45 = $25.40 break-even

If we look above the Net Income break-even area to the ADJ-Silver Income per oz, you will notice that is lower at $3.40.  I obtained this lower figure by certain calculations such as deducting an estimated percentage by-product income to get a more representative pure silver break-even figure.   I will explain this more in detail at the SRSrocco Report.

Regardless, we can at least see for the top 12 primary silver miners to state net income profits, they will need to average approximately $25.40 an ounce silver for the group.  Now, this doesn’t mean all the miners are making money at $25.40, some companies actually reported net income losses during Q1 2013 as their break-even price was $30+ an ounce.

Part of the reason why I developed my ADJ-Silver income per ounce (ADJ = adjusted) was due to the relative volatility inherent in the net income approach.  For example, if a mining company sells a property or has an impairment charge during the quarter, it can greatly impact net income.  Thus, the company could have a much higher or lower silver breakeven, due to circumstances that don’t pertain to the actual day to day business of mining.

Now that we understand the formula for calculating net income break-even, at $18 the primary silver miners as a group are losing approximately $7+ an ounce of net income.  We must remember, even though the current price of silver is in the $18 level, the average for the second quarter is presently $23.15.

If we were to make a rough estimate based on $18 silver at 20 million oz worth of silver sales assuming costs remained the same, the 12 top primary silver miners would be losing approximately $140+ million of net income… and that figure could be even greater.  Normally, as realized prices fall, net income declines in a greater percentage.

However, if the paper price of silver remains this low or falls lower for an extended period, we could see a net income break-even price below the LOWEST COST PRIMARY SILVER PRODUCERS ON THE PLANET.

Of course these miners could cut back on everything, such as exploration, development, maintenance as well as shutting down high cost mines, laying off employees, withholding dividends and etc.  But this is not the path these miners should take if the world finally woke up to the horrors of debt financialization by its fiat monetary masters.

THE KEY FUNDAMENTAL: The Precious Metal Investor’s Secret Weapon

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As I mentioned in the beginning of the article, precious metal investors and analysts don’t realize there is a secret weapon at their disposal.  This key fundamental is something even those at the FED & Central Banks are unable to manipulate.  It is the EROI — Energy Returned on Invested.

There is a reason why that EROI icon above is apart of my logo on my website.  The EROI is the most important fundamental relationship that determines the success or failure of a all living systems including all businesses, corporations, societies and civilizations.

The Collapse of the Roman Empire and the Falling EROI

There has been a great deal of debate on the reasons why the Roman Empire collapsed.  Some say it was due to the decline in morals, while others say it was due to either the debasement of the currency, high taxation, corruption, expensive wars, decay of infrastructure,  and so on and so forth.

However, the real reason the Roman Empire collapsed was due to the falling EROI of their civilization. 

The EROI can be simply explained by how much energy is returned by the energy invested.  Some like to use the abbreviation of EROEI, but I find the less letters the better.  Even some of the top minds who research this subject use EROI to describe it.

The rule of thumb is this… the higher the EROI ratio the more energy profits which may translate into a higher percentage of financial profits and gains.  Individuals need to realize ENERGY DRIVES THE WORLD MARKETS… NOT FINANCE.  Finance only steers the markets.  And as I have stated before, finance is presently steering the world over the cliff.

Let me give an hypothetical example of the EROI at work.  Let’s assume a family owns a business and is doing so at an EROI of 3/1.  For each unit of energy they use or consume, they have 2 units of energy left over as a profit…. not 3 as one unit represents the energy consumed.  A break-even EROI would of course be a 1/1 ratio.

They take these 2 energy units which are converted to money by the market to maintain their household and have 1 unit left over to put into a local bank as savings.  I realize some of you may not agree with this theory, but just follow along for a  time being.  Furthermore, if we were to assume that the other families in the town averaged about the same 3/1 EROI and deposited their 1 unit of energy profit as money in the bank, there would be a great deal of money (energy profits) deposited over a period of a year.

Let’s also assume this money was in the form of gold or silver.  Just think about all the work and energy by all the families that went into producing that 1 daily unit of energy profit that has accumulated in the bank.

Now, one day two strangers ride into this town (circa 1800’s) with a few firearms.  They go to the local saloon, grab a bite and a few shots of whiskey and then head over to the local bank.  There, they calmly walk in and hold up the bank and ask for the all the gold and silver in the bank vault.  After a few minutes work, they leave the town with a great deal of money.

If we think about the EROI of the bank robbers it could be something like 10,000+/1.  If you add up the energy (money) they invested in their lunch and whiskey, plus all the energy they expended in riding to the town, robbing the bank and their grand escape, you will find out it was a fraction of a fraction compared to all the energy units that were now stored in those gold and silver coins resting in their saddle bags.

I realize this simple example may  stir up some debate, but this very same method was in fact the very same business model practiced by the early rulers of the Roman Empire.

In the beginning stages of the Roman Empire, it took very little in the way of energy costs to raise, train and use the Roman Legions to win the battles to acquire more lands.  These lands contained great energy wealth stored in either stolen riches, mines, agricultural lands, timber and human labor.

Here we can see that the EROI of using armed forces to acquire riches, wealth and lands by the Roman Emperors was quite similar to the two robbers stealing the gold and silver from the local bank.  Sure, there was more energy consumed and more elaborate in the Roman Empire’s example, but relatively it is the same method.

Most of the lands the Roman Empire conquered in the early stages were no match for the well trained Roman Legions.  However, as the Roman Empire grew, so did the energy costs to maintain its infrastructure, forts, and legions from invading forces.

Towards the end of the Roman Empire, the Emperors found themselves in a dilemma.  They had the forces to conquer the Northern Germanic Tribes, but there was very little in the way of  wealth.  On-the-other-hand, the Persians in the south had a great deal of stored energy wealth for the taking, but the cost was too great.  In both examples, the Energy Returned On Invested (EROI) was too low to maintain the Roman Empire’s bloated system.

So, as the Roman Empire stagnated under the weight of increased energy costs to maintain their huge lands, legions and its society, the EROI ratio declined to point where the Emperors had to resort to debasing their currency to maintain the illusion of prosperity.

The days of high EROI were now over for the Roman Empire.  As societies become more complex, the EROI of the system declines.  Typically, the rulers will try to fight the negative forces of a declining EROI by raising taxes, debasing the currency or other desperate measures.  However, it always fails in the end.

Now, that we have a basic understanding of the EROI and its impact on complex societies, why is the EROI a SECRET WEAPON for the precious metal investor?

THE FED:  The Violator of the EROI

Due to the Fed and Central Bank market rigging, the precious metal paper prices have fallen into the toilet.  The forecasts of $1,000 gold by the MSM hacks doesn’t seem so ridiculous now that the price of the yellow metal is only $100 from that level.

Well, let me say this… they may be able to postpone the collapse of fiat based financial system money due to a falling EROI, but they will never be able to stop it.  The FED and the majority of the fiat monetary mouthpieces have no clue on how energy or the falling EROI relates to the economy.

As I mentioned before, the world is driven by energy.  Energy is the basis of our monetary system, whether you want to believe it or not.  The majority of the people in the world’s economies have to abide by the RULES of the EROI.  They work very hard to produce a small degree of energy profits in which they exchange for fiat monetary notes.

As the world’s economies become more complex, the EROI ratio declines.  So the governments resort to increasing taxes, printing money  and waging wars to obtain high EROI energy sources from foreign countries.

This is how the FED and Central Banks violate the EROI.  Today, we are at the last stages of this CHARADE as the FED and Central Banks realize that printing money no longer provides enough bang for the buck.  So, they now have to purchase their own Treasuries, Bonds and other more worthless paper financial instruments such as Mortgage Backed Securities.

As the FED purchases $85 billion a month of U.S. Treasuries and MBS, it adds another $85 billion worth of ENERGY IOU’s rather than real assets to its balance sheet.  We must remember everything is based on energy.  Thus, ENERGY = MONEY

A long dated treasury or MBS is nothing more than debt instrument only settled in the future by the economic growth based on the burning of energy.  The FED is basically trying to postpone the falling EROI of our economic system by propping up the present economy by adding massive amounts of energy debts to its balance sheet –the same is also true for the U.S. Govt.

Thus, the FED has debased the value of the energy profits by way of fiat money.  The public does not realize the loss of value because they have been indoctrinated to believe that fiat money is real money.

Why Gold & Silver Are Real Money

Gold and Silver represent real money because they are stores of what I call ‘TRADE-ABLE ENERGY VALUE”.  Each coin of gold and silver contain a certain amount of stored energy value… which is paid in full.

Most precious metal analysts who say gold and silver are true stores of wealth, believe so because they don’t offer any “counter-party risk.”   I agree, but I would like to add the following footnote.  Gold and Silver don’t have counter-party risk because they are don’t have  any ENERGY DEBTS attached to them.

The problem with most paper assets including gold and silver futures options and other derivatives is that their values are derived in fiat monetary system.  Fiat money is based upon the debt of the respective governments via their treasury and bond markets.  Again, treasuries and bonds are not assets… they are energy iou’s.  The tremendous growth of the world’s bond markets is just another way of disguising the falling EROI of the world’s economies.

This recent take-down in the paper price of gold and silver is an attempt by the fiat monetary authorities to COVER-UP the true barometers of stored energy value.  We must remember, just as the Roman Emperors debased their currency to try and offset the declining EROI forces, the Fed and Central Banks are presently continuing this same folly.

While some central banks participate in the debasement of their currencies, they only do so because they presently have no other choice as they are tied to the global fiat monetary system.  However, these central banks are quietly acquiring large amounts of gold because they realize the historic nature of true stores of wealth.

Furthermore, the EROI ratios of the energy sources that run the world’s economies are continuing to decline.  The United States EROI of oil and gas has fallen from over 100/1 in the 1930’s to under 10/1 presently.  Even though there may be a great deal of Shale Oil sitting underneath the United States, it suffers from both a very low EROI ratio and high annual decline rate.

I am completely surprised by analysts who are putting out flyers and bullish analysis of the Shale Energy Industry.  They honestly believe shale oil wells that suffer annual decline rates of over 40-50% are going to offset the world’s 5% global decline rate from existing fields.

According to the IEA, the world needs to add 4-5 million barrels a day of new oil each year just to keep production from falling.   Any analyst who believes shale oil is the next “GREAT INVESTMENT” and energy savior, fails to comprehend simple 5th grade math.  As I mentioned before, the world is full of lousy analysis.

Getting Back to the Silver Miners

When I provide data and information that reveals the reality of the silver mining industry, I do so to get to the real truth.   I have a great deal of respect for the CEO’s, management, staff and employees of silver mining companies.

They actually produce a necessary metal for industry and provide a great store of energy value for investors who understand real wealth.  The gold and silver miners are the true wealth creators and money providers in the world, whereas the present banking system we have actually steals and siphons this wealth.  The are in fact a LEECH on society.

At the current $18 paper price of silver, nearly all the primary miners would be stating net income losses.   Some of the miners may cut costs and spending to at least tread water, but other much higher cost miners would be severely impacted.

What the Fed is doing to manipulate the precious metals lower while inflating the value of PAPER ENERGY IOU’s such as Treasuries, Bonds, MBS, Stocks, IRA’s, Pension Plans etc and etc, is actually creating an ever-increasing unstable financial system.

The best thing to do to take advantage of much lower silver prices, investors should be purchasing silver bullion and coins by the droves.  Even though it seems as if the paper prices of silver can keep falling, it seems highly unlikely that the FED and Central Banks would be stupid enough to allow the bankruptcy the ENTIRE PRIMARY SILVER MINING INDUSTRY.

Yes, I realize 71% of silver production comes from by-product metal producers, but I would also like to add (according to the 2013 World Silver Survey) the 221 million oz of the total 787 million oz of silver came from the primary silver miners in 2012.

The rumor that the FED may be orchestrating this huge take-down in the paper price of gold and silver to provide large profits to help recapitalize the very banks (who control the precious metals futures markets) may not seem so crazy after-all.  If we think about it, how on earth could these bullion banks survive with record short positions in gold and silver right after the FED announcement of QE3?

The majority of the world has no idea of the power of owning gold and silver.  As the global economic system continues to disintegrate, people will realize paper based ENERGY IOU’s are not real assets or stores of wealth.  When the world makes the transition from holding increasingly worthless debt based instruments and into physical stores of wealth such as gold and silver, we will witness the greatest explosion of value in these TRADE-ABLE ENERGY ASSETS.

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42 Comments on "Can the Primary Miners Survive $18 Silver?"

  1. Norm Gibbons | June 28, 2013 at 8:32 am |

    Absolute fantastic article Steve. You must be a fan of Tainter.


    • Norm… thanks a great deal. Yes, I enjoy Tainter’s work quite a bit. Let’s say his analysis is better than most of the worthless rubbish out there.

  2. i like your notion of EROI.
    but i don’t feel comfortable when you apply it to explain the entire mechanism of the economy or society.

    i think governments or corporations or individuals go bust when they suffer from prolonged period of negative cashflow. anyone running negative cashflow goes bust when they can’t borrow any more or when they can’t print any more(when they are governments) because the paper money becomes worthless.

    internal rate of return is the generalised benchmark to measure whether any projects can be taken on. it is a measure that take cares of the cashflows.

    EROI is probably a measure of a narrower scope.

    i have not given it much thought. so if i misunderstand your concept, please forgive me.

    but today is a day that makes history. the 22 months long correction of gold and 26 months long silver correction is finally over!! capitulation/liquidation sales by fund managers marked the bottom!

    congrats to all gold/silver buddies around the world!!

    • I think his point about EROI is that it underlies everything. The light sweet (cheap, hi EROI) crude has been a one-time lottery ticket for humanity and is literally the blood of the world economy. The fact that there is NO short-term substitute for this commodity is a catastrophe for humanity.

      • webster… exactly. The EROI ratio determines whether any living system succeeds or fails.

        Judejin… actually the Cash Flow is more of the narrow scale and the EROI is the broader one. Hunter Gatherers’ lifestyles had on average an EROI of 10/1… and they didn’t have any cash flow. Farming by human hand prior to using horse or oxen was 5-8/1. Today’s modern farming practice including the food supply chain system is 1/10… it consumes 10 times the energy to create, produce and transport 1 unit of energy in the form of food.


        • steve, i think i nailed a counter-argument to your EROI thesis.

          declining EROI aggravates an already unsustainable cashflow negative government.
          but declining EROI won’t matter in a sound society where cashflow is always positive or neutral.

          the end products that are consumed by humans provide humans the same amount of energy to sustain human’s physical activities as they did thousands of years ago, but the energy that are spent in producing them have become greater and greater as human wants become more sophisticated.

          so energy return on investment becomes smaller and smaller as society progresses from the end consumers’ perspective.

          you gave us the example that “Farming by human hand prior to using horse or oxen was 5-8/1.” but now, “Today’s modern farming practice including the food supply chain system is 1/10.”

          let’s imagine one day farming on remote planet requires astronomical amount of energy to bring the food back to the earth. or silver/gold mining on the moon.

          i still believe the cashflow metrics is a much more universal and straightforward benchmark to explain why roman fell and why central banking and the current status quo must fail.

          in a sound society, a declining EROI will force the society to adapt to a less abundant way of living, to save more, to innovate more. whereas, now, declining EROI forces the government to print more, to fake the shale gas illusion, etc.

          in a sound society, declining EROI doesn’t necessarily bring about negative cashflow, which i believe is the more fundamental problem.

          a thousand years later, armed with fusion technology, a central bank-based regime plus social benefits safety net will still fail no matter EROI will become.

          or in weimer republic or zimbabwe, declining EROI was not the issue.

          but i still like your concept of EROI.

          • Judejin… one of the problems with advanced societies such as ours, is that it has been built on relatively high EROI energy. Not many people realize that the U.S. suffers from a QUARTER OF A MILLION of water main breaks a year… and this number is about to go exponential when tax revenues decline as economic activity disintegrates.

            Very few see the WHOLE PICTURE. It goes way above and beyond CASH FLOW.


            Thus, the society or advanced civilization PEAKS and COLLAPSES.

            There are no silver bullets.

            Well, that’s enough of that as it is a waste of time to BEAT A DEAD HORSE…you know what I am saying? Basically debating ONE on ONE can be a very LOW RETURN ON ENERGY INVESTED….lol


          • “….in a sound society, a declining EROI will force the society to adapt to a less abundant way of living, to save more, to innovate more.”

            In this hypothetical sound society, how does one fly planes and deliver ALL consumer goods via 18-wheelers that get 5-6mpg at best? At this point innovation will mean survival at a local level with a greatly reduced standard of living and it will mean a dramatically reduced population without the oil to food conversion of agribiz.

  3. OutLookingIn | June 28, 2013 at 10:18 am |

    Simply put;

    There is the “gold price” and then theres the “price of gold.”

    The former is the ‘paper’ price and the later is the price for the ‘real’ thing.

  4. there should be a clear methodology to calculate break-even cost for silver even for non-primary silver miners which derive bigger share of revenue from other metals and smaller share of revenue from silver.

    have you done so?

    i think the ridiculous concept of cash cost was designed and promoted by wall street as part of the silver price suppression scheme. “wow, cash cost is so low, so silver is not valuable”

    • judejin… it would be nice to figure by-product silver break-even, however there is no good way of doing so. As I mentioned in the article, the top 12 primary silver miners had $255 million in revenue from the by-product credits. If there was just one metal, then sure we could get an idea of what a break-even could be, but there are 4 different metals so it becomes virtually impossible.

      However, I will say this… when PEAK SILVER occurs, it will take place FIRST and FOREMOST in the Base Metal by-product mining rather than from primary silver mining. This is why I believe the Primary silver miners will be better investments in a peak oil environment because they use a fraction of the fuel than does a huge open-pit Copper mine for instance that has by-product silver.

      Lastly, even though Copper, Lead, Zinc and Gold have by-product silver, they don’t give it away for free. I have heard some clueless analysts say that these big base metal mines produce silver for basically free. That is the most absurd thing I have heard.

      For example, KGHM Polska is the largest silver producer in the world located in Poland. It produced something like 41 million oz of silver last year. Most of this silver is a by-product of copper mining. Anyhow, if you remember during Jan of this year, HSBC contracted to purchased $532 million worth of KGHM’s silver.

      Anyhow, these base metal miners use all their by-product revenue to shore up their balance sheets.


      • i see your point.

        your way of using EROI to explain the peak of prosperity is very useful when the system/society is based on fraud(now) or force(roman).

        but what about a perfect society that is based on sound money and freedom? in such a society where declining EROI also occurs, would it still be as fatal a blow as it is now?

        in such a sound money society, i’d say declining EROI would hurt material abundance but it would not break down the society and would not slow down technological progress.

        human’s use of oil is by most part a technogical breakthru. EROI could one day become almost infinite when fusion for example becomes viable. but i believe under central-bank fiat money system, even fusion technology won’t help!

        so in this sense, i’d say cashflow measure is more applicable in all cases. EROI may be difficult or impossible to calculate in many business.

        again, this is just my five minute brain storming. refute is welcome!

  5. welcome to comunism

  6. Steve, somebody on ZeroHedge the other day (I think I saw you on that thread) made the point that perhaps one of the evil schemes is to drive the miners out of business and then print up some bucks to purchase them for pennies on the dollar. Just like the bank robbers in your example.

    What’s your opinion on that?

    • Webster… I could actually see some merit in that scheme, however I don’t think they could pull that one off. There are way too many smart professional investors out there that would buy silver before it got that cheap.

      I don’t think we are going to stay below $20 for long. Now if this was back in the 1970-80 period, then sure we could drop down and stay below $10 for decades as we did in the 1990’s and most of the 2000 until 2005-6. The reason why I say that is due to the fact that the world had another 30-40 years worth of growing global oil production.

      Today, global oil production is in a plateau and I believe will start to decline here in the next few years. Available Net Oil Exports have already peaked in 2005 at 40 million barrels a day. When I refer to Available Net Oil Exports, I mean oil left over for all the other countries in the world besides the top 33 oil exporters, China and India. There are something like 150 oil importing countries fighting over a declining supply.

      Available Net Oil Exports are now below 35 mbd… and still declining. So, with this in mind, the mining of all metals will just become more expensive going forward.

      Lastly, this huge price take-down will not last. The average price of silver for Q2 so far is $23 an ounce…. which is only $2-3 dollars below a net income break-even for the group. I think we are going to see $25-26 or higher by the end of the year… so I don’t think the majority of the primary miners will in any trouble.


      • I see that people are so focused on the financial system. Rightly so I guess. However, it seems to me that one of the key aspects of the 2008 crash was that it was preceded immediately by an oil price spike up to $147/barrel. That’s kind of what I have my eye out for more so than any other factor.

  7. Rick Rule shares his view on the cost for primary silver mining companies.

    • Sopel… thanks a bunch for linking that interview. I listened to the whole interview and agree with many of the things Rick had to say. However, I do disagree with him a some points. Rick still looks at mining like it will be BAU – Business as Usual for the next 5-10-15 years. I think we start to run into trouble with energy within the next 2-4 years.

      Shale Oil is more hype than reality. Once the world figures out that Shale oil or any other unconventional oil source will not be able to make a difference in the overall decline rate of existing oil fields, we are going to see serious re-balancing of wealth — from paper IOUS to physical assets such as precious metals.

      When Rick says that miners could still produce metal below cash costs for a while, I disagree. Maybe a few gold miners who have a very high cast cost like some of the South African gold producers, but not Hecla for example.

      Hecla stated a $5.02 cash cost in Q1 2013 from its Greens Creek mine. Its total revenue for the quarter was $73 million and its by-product revenue was $45 million. For pete sakes, its by-product revenue accounted for 62% of its total revenue. So it is no surprise that if you take all that by-product revenue and subtract it out from your cash cost, you are going to get a very low cash cost that means absolutely nothing.

      Hecla’s Gross Margin of Adjusted Income to Revenue was a lousy 14% that quarter even though they stated an extremely low $5.02 cash cost.

      The only way I would agree with Rick on that call, would be if a Silver miner had say a $15-18 cash cost and had virtually no by-product credits They were in fact mostly a pure silver mining company. Then maybe for a quarter or so, it could sell its silver below that cash cost. However, most miners do not fit into that category.

      I agree with Rick that Enterprise Value is completely worthless as a valuation. Furthermore, investing in Junior explorers will be more difficult than just finding the the top 5-10% that survive the drying up of investment dollars.

      I believe that if a Junior Miner with all the right things going for it, does not become a commercial mine by 2018-2020, it may be in for some serious trouble dealing with energy issues — falling supply and much higher prices.


  8. another thing, have you compiled a historical database primary silver mining break-even cost all the way to the 1960s – 1970s?

    this database may be useful to compare the impact of silver price suppression on silver mining then and now.

    this could be a very challening task!

    • JudeJin… that would be a good idea, however public reports aren’t that great going back more than say 15-20 years at most. However, the real important aspect to understand in estimating break-even for silver is the relationship to the PRICE OF A BARREL OF OIL.

      Oil was cheap back before 2004. From 2005 to 2011 it tripled. This was not due to monetary printing… rather it was due to the decline of AVAILABLE NET OIL EXPORTS that peaked in 2005 and have been declining ever since. Even though overall global oil production has been flat and actually rising a million barrels or so since 2005, Available Net Oil Exports for the remaining 150 oil importing countries has been declining which means increased competition for less supply.

      This only gets much worse going forward. Again, Shale Energy is a pipe dream that has been providing some additional supply… but its very expensive, and it won’t last long.


  9. The True Scale of Gold and Silver

    I have been pondering and reflecting to share some knowledge that I have acquired when I was studying the financial system of Islam during my college years. I studied engineering but I was fascinated by the different financial systems that existed in the past and some survive to the present. One of those ancient systems is the financial system of Islam. The financial system in Islam DOES NOT recognize any fiat money; it only recognizes GOLD and SILVER as money.

    Therefore, I decided to go back to my study and calculate the fair price of Gold and silver as set in the Islamic financial system. Why, because in the era when Islam was flourishing there was no real poverty across the entire financial system due to the use of Gold and silver and the implementation of their fair tax system (explain later).

    The question is what is the fair price (scale) of Gold and Silver? To answer this question with clarity, I have to provide some background first. In the financial system of Islam there were two metal coins that were used:

    1. GOLD Dinar = 4.250 grams of pure gold = 0.136641 Troy Ounce
    2. Silver Dirham = 2.975 grams of pure silver = 0.095648 Troy Ounce

    [1 Gold Troy ounce = 31.1034768 grams]
    The Gold and silver financial tax system is stated that every individual has to pay a yearly (Lunar Year = 355 days) 2.5% Tax (in gold or silver) on anything above the minimum wealth set by the decree of the prophet of Islam to be 20 Gold Dinar which equal exactly 85 grams of Gold (2.732813458 Troy Ounce) OR 200 Silver Dirham which equal exactly 595 grams of Silver (19.12969421 Troy Ounce). This means that:
    2.732813458 Troy Gold Ounce = 19.12969421 Troy Silver Ounce
    This means that if your wealth at present time is below any of these two amounts you do not have to pay the yearly tax when it is due.
    Now that we have established the basics of the tax system in Islam, let us move to the true ratio of Gold to Silver. You are going to be captivated by the finding.
    Divide 19.12969421 by 2.732813458 you get the ratio of 7
    19.12969421 / 2.732813458 = 7 (God’s Magic Number)
    Therefore the true ratio set by God scale is 7 and not the current ratio of 66 (According to Gold and Silver prices on June 27, 2013).

    Ok let us fathom the fathomless and determine the fair price of Gold and Silver in USD.
    The financial system in Islam uses only Gold and Silver as money and has set the minimum taxable amount as stated above. However, it is of paramount importance to understand that this minimum amount is not set arbitrarily but it was set to be equal to be one year’s provision of essential food-stuffs for an average family. Please note that the definition in the USA of an average family is given by USDA (United States Department of Agriculture) to be 4 people, reference:
    Thus, the tax system in Islam said that an average family has to at least be able to buy food and sustain itself for a lunar year before it there is responsibility to pay tax on anything above the minimum taxable amount. Therefore, the basis for the minimum taxable amount was not the physical count of Gold Dinar but rather the purchasing power of the money. [Roy Jastram,
    Hence we can use the data given by the USDA to compute the true value of a Troy Gold and silver ounces. Here is how:
    According to USDA, the average family of food consumption per solar calendar month (all Prices are in USD):

    Thrifty plan Low-cost plan Moderate-cost plan Liberal plan
    548.00 697.50 861.20 1067.30
    This is for a family of four with two children age: 2-3 and 4-5 years

    Thrifty plan Low-cost plan Moderate-cost plan Liberal plan

    629.10 821.10 1024.70 1244.30

    This is for a family of four with two children age: 6-8 and 9-11 years.

    For my calculation I will take the smallest and poorest family (The first thrifty plan) which means we will take the monthly food consumption of 548 USD. The yearly cost of food for this the average poorest family in USA is 548 * 12 = USD 6,576.00. Deduct 10 days’ worth of food cost for the difference between the lunar and solar year we get USD 6,576.00 – 180.16 USD = USD 6,395.84
    Hence, to get the fair value of Gold and Silver we have to divide this amount by the number of Ounces set earlier for feeding an average family for one lunar year which is 2.732813458 of Troy Ounce Gold or 19.12969421 Troy Ounce Silver.
    Troy Ounce Gold Fair Price = 6,395.84/ 2.732813458 = USD 2,340.38
    Troy Ounce Gold Fair Price = 6,395.84/ 19.12969421 = USD 334.34
    Therefore, the current Troy ounce of gold should be 2340.38 USD. For silver the Troy Ounce of Pure Silver should be 334.34 USD.
    Please note that these prices are based on the poorest average family in USA and not the average of the average family given by USDA. If we use true average the numbers will be much higher but I wanted to be extremely cautious so I used the minimum of all average family spending per USDA data.
    I would like to end my finding by the words of God stated in the Holy book:
    “We raised the heavens and we set the scale. Do not tip the scale”
    It looks like the evil doers of mankind have tipped the scale so far that the heavens (the universal laws of the universe) will set the scale back. In the case of Silver the scale is tipped so far out balance according to these universal law calculations that the only conclusion I have is the evil ones are tipping the balance to satisfy their satanic desire of hoarding wealth and removing it from the hands of righteous ones in order to enslave them and take their freedom and stored energy away from them. Based on the universal physics and thermodynamic laws, stored energy cannot be lost; it can only be transferred to another type of energy.
    It is my conclusion that this battle is not between Gold and the fiat USD but rather it is a battle between the evil ones and the virtuous ones. It is the battle between freedom and slavery; it is the battle between an evanescent financial system of the USD and the lasting eternal system of GOLD and SILVER. The universe has set these two metals to be the store of energy and has set the ratio to 7 between them. This 7/1 ratio is the true scale of the universe law balance between Gold and Silver; therefore the current ratio of 66 will revert back when the law of the universe resets the balance through the painful process of the reset that mankind has to endure due to their evil doing.
    In science we know what happens when we tip the scale of anything in this universe, we pay the price of our fault. If mankind tips the scale physics, chemistry, or biology mankind will pay dearly for its mistakes and evil doing. The same applied to financial systems as they follow the same rules of the universe. There is no escape from the scale, the universe runs on equations and those equations define the universe scale. Therefore, if we play with one side of the equality in our financial equations such as Gold and Silver true value of energy store, we will sooner or later have to pay dearly to reset the equality in the equation so the left hand side and right hand side are equal.
    I also would like to share a story that I read in one of the ancient books of Islam that talks about the river Euphrates that passes through Syria and Iraq. The Ancient story said that the river Euphrates will expose a mountain of Gold and when that happens, people will fight to get the Gold from that mountain. The Prophet of Islam said: “The Last Hour will not arrive until the Euphrates uncovers a mountain of gold, over which people will fight. Ninety-nine out of every hundred will die but every man amongst them would say that perhaps he would be the one who will be saved.” This ancient story is perhaps a testimony that Gold will be the greatest store of energy until the end of time. Furthermore, it is apparently clear from this ancient story that Gold will be valued so high that one is willing to die in order to get it even though one knows that the survival probability is only 1%.
    “We raised the heavens and we set the scale. Do not tip the scale”
    The evil doers will not triumph against the laws of the universe.
    With my greatest regards and best wishes of heavenly balance restored to all.


    • OutLookingIn | June 30, 2013 at 9:57 am |

      Re: The True Scale


      Thank you very much for this quite fascinating piece, that obviiously shows some deep thought and even deeper research. There is much food for thought. I agree that there will be a great settling of accounts and a great re-setting of values. What those valuation levels will be, remain to be seen. As of now they remain hidden from our view, revealing only that this coming event is due. We live in interesting times indeed!

  10. steve,
    gold/silver is not just a store of energy value. just imagine fusion technology becomes viable and energy suddenly becomes very cheap again.

    gold/silver is a store of purchase power and wealth because gold/silver is money, medium of exchange. we can derive the theoretical price of gold/silver based on the money supply.

    i think one can use EROI metrics to explain why mining cost will go ballistic or why deficits will go ballistic if the status quo can’t change.

    gold/silver bugs are men of reason. so please forgive me if i’m going too far.

    • judejin…. it doesn’t look like fusion will ever become a cheap viable source of energy. Ugo Bardi at his BLOG (, started out by proving Rossi’s E-Cat doesn’t work at “The Sinking of the E-Cat”.

      Supposedly Rossi had E-Cat (cold fusion) machines being built at some plant… according to Ugo Bardi:

      Rossi also said that he was building a factory in the United States where he would produce E-Cats by the millions; to be sold as water heaters for people’s homes. According to some recent statements by Rossi, the device had been undergoing safety testing for months at Underwriters Laboratory.

      It couldn’t go unnoticed in Florida that someone was claiming to be producing nuclear reactors in large numbers. On February 24, an officer of the State of Florida Bureau of Radiation Control went to investigate what was going on in the pretended “E-Cat factory” in Miami. There, he found no factory, but an apartment and Andrea Rossi in person. Questioned on the E-Cat, Rossi declared that “no nuclear reactions occur inside the device.” Rossi also stated that all the facilities for testing and production are “overseas,” and that safety certification with Underwriters Laboratory will be arranged in the future. The officer then left, writing in his report that his bureau has no jurisdiction over a device which has nothing nuclear inside. (The complete documentation is here, comments can be found here and here. Rossi himself confirmed the story here.)


      There is no ENERGY SILVER BULLET that is going to save us or make energy cheap. Even if we did find something, its too late because our whole economic system is based on fossil fuels. To change over to another energy technology would be way too expensive for this hugely indebted world that we have presently.

      Furthermore, a new energy technology would take a great deal of mining, transportation, manufacturing and etc to bring it to market. All that is done by fossil fuels currently.

      Judejin… I believe if you keep reading the future material that I will be putting out, you may (or may not) come to understand that EVERYTHING COMES FROM ENERGY…. and gold and silver are that store of energy value.


      • i’m just using fusion as an example. i believe human ingenuity will find a solution to the energy problem in the end.

        imagine we’re living a world based on sound money and pure capitalism without government intervention, a declining EROI will force the world to suffer a lower standard of living and to save more until the world finds a better energy source. but such a world won’t be destroyed by a declining EROI. in such a world, gold/silver will lose value against energy since energy will become more and more expensive. but in such a world gold/silver is still money, medium of exchange, a store of wealth, although it is no longer a good “store of energy”.

        imagine a world with a rising EROI and but suddenly some dictator comes into power. he demanded money supply to be doubled every year. the world will be destroyed very quickly!

        a declining EROI is neither necessary nor enough to destroy a world.

        but a central banking system with a lot of government intervention is both necessary and enough to destroy a world.

        a declining EROI will make the current world collapse faster, but won’t destroy a world based sound money and pure capitalsim.

        i hope i have made my point clear.

  11. Kansas Crude | June 29, 2013 at 9:09 am |

    Hey Steve started doing the Oil Drum in the early 2000’s so understand the concept I am in total agreement with all the points but have always preferred the EROEI abbreviation. I get to much pushback from the financial types for EROI. As a Finance MBA myself its misleading IMO. Cause in point is Judejin who analyzes the concept purely as a financial one and thus seems to disregard the laws of physics and its entrophy by stating you don’t need to pay attention to this as long as the IRR is positive……the reasoning is alternate forms of energy have different prices so therefore you can ignore the consequences that substitution allows. I myself still stuggle with that assumption because possibly with the exception of renewables all naturally stored energy should be subject EROEI calculations.

    Judejin writes

    “i like your notion of EROI.
    but i don’t feel comfortable when you apply it to explain the entire mechanism of the economy or society.

    i think governments or corporations or individuals go bust when they suffer from prolonged period of negative cashflow. anyone running negative cashflow goes bust when they can’t borrow any more or when they can’t print any more(when they are governments) because the paper money becomes worthless.

    internal rate of return is the generalised benchmark to measure whether any projects can be taken on. it is a measure that take cares of the cashflows.

    EROI is probably a measure of a narrower scope.’

    Translation as long as coal or natty or ethanol is $ cheaper than oil you can spend more energy units to harvest oil or whatever than you may get back…..ROI sez so Maybe its just a labeling issue maybe a short circuit to the brain from ROI….seems trite but ROI is a like waving a red cape in front of the bull mentality why aid to the tunnelvision? The EROI lexicon invites confusion IMO.

    Have been heeding your words and adding to the stack. Thanks for all the solid work spreading the SRSROCCO website to lots of my contacts. Best KC

    • Kansas Crude… thanks for the great reply. I agree with you on the subject of EROI vs IRR. Tar Sands and Shale Oil may have decent IRR, but their EROI ratios are probably too low to support our complex advanced technological society.

      I find it quite IRONIC that the shale oil companies are slapping themselves on the back for making supposed nice profits as their LOW EROI OIL slowly starves to death our way of life.

      One more thing. As I explained in the article and in some of the comments, BY-PRODUCT ACCOUNTING is the standard in the mining industry. Even though the individual who thought my net income approach made good sense, they (better than saying he or she), still believed that by-product accounting was the best way to approach mining costs and etc.

      I happen to like the GROSS ACCOUNTING method. As I stated in the article, the $255 million of by-product revenue made a $90 million net income gain instead of what could have been a $165 million net income loss.

      KC… glad to have you add your input anytime.


  12. Steve

    You are exactly correct. For the longest time I tried to invest in oil but the futures market with rolls and such makes it damn near impossible. I switched to silver as there is little else tied so directly to mining than oil. Hence, a silver bar or coin has stored energy value meaning if oil doubles the ability to mine at $18 is simply not possible. Conclusion, silver will on average reflect the price of energy needed to extract it.

  13. btw, i’m a believe in austrian school of economics and murray rothbard’s libertarian ideas.

    • I have to admit though, during the great depression, it seems oil was cheap and agriculturre still had room to grow, the acquifiers hadn’t been depleted yet etc…..Yet that was still a massive train wreck.

      so there’s something going on besides the availability of energy, I”ll give you that.

  14. plunge in gold price spurred another round of gold jewelry buying spree in china this weekend, although not to the same extent as last time.

    gold jewelry retail price is around 350 RMB/gram about 40% higher gold spot price.

    retail gold bullion price is about 5%-10% higher than gold spot price.

    china’s M2 is set to increase by 15% this year, 15 trillion RMB. 5% of M2 increase can buy out the entire global gold/silver production at current prices. or this year’s M2 increase can buy out 20 years’ global gold/silver production at current prices.

    RMB M2 doubles every 4 years!

    i believe no country can survive the approaching hyperinflationary collapse.

  15. steve,
    i think even the silver institute supply/demand numbers can’t be relied upon.

    it’s impossible silver jewelry stayed flat from 2003 to 2012 given huge income rise in emerging markets.
    it’s impossible silver coin/medals only increased by about 200% from 2003 to 2012( silver eagle increased by 200%+, panda increased by 10 fold! chinese silver commemorative coin/medals skyrocketed!, maples etc all inreased by much more than 200%).
    it’s impossible silverware dropped by over 30% from 2003 to 2012 given huge income increase in emerging markets.

    i think these inaccurate numbers are used to hide the silver deficit and depletion of silver stock at comex and secret sales by SLV and official stock.

    the true nature of supply and demand and silver deficit could be mind-bogglingly bullish.

    the silver stock at bank cartel’s disposal could be less than the gold stock! just like silver inventory at shanghai futures exchange is less than the gold reserve of china.

    banking cartel has positioned itself for the inevitable stampede at the expenses of helpless miners and investors. physical accumulators benefited too!

    in the final fateful week of april of 2011, chinese media put out repeated warnings about silver bubbles. i could well imagine chinese govt had a hand in smacking down the silver price in collaberation with the fed. the western media rolled out carlos slim and obama killed the head of terrorists to warn the silver “terrorists” to back off!

  16. So most people on this blog have probably seen this must-watch video on how silver is produced:

    Now explain how in the hell that can be accomplished for even close to $20

  17. Good article SRS. Energy is indeed critical and I’ve seen it said that our multi-billion population could not exist without the discovery of and energy to fix atmospheric nitrogen for fertillizer.

    The tradeable energy value is, I suspect, only part of the value of gold and silver. The scarcity also matters. Without doing the hard research I imagine that more energy in needed to produce an ounce of aluminum than an ounce of gold, although the search for aluminum ore is trivial compared to gold.

    • SteveW… thanks for the reply. Let me see if I can clarify this TRADE-ABLE ENERGY VALUE locked into gold and silver.

      If you think about all the processes it takes to bring to market a 1 inch copper pipe you can purchase at your local hardware store, I would guarantee the overwhelming value of that pipe comes from the energy IN ALL STAGES AND IN ALL FORMS along the way.

      If supply and demand forces for the copper pipe and the marginal utility are in balance, then the overwhelming factor in giving its value is in the ENERGY IN ALL FORMS AND IN ALL STAGES.

      I will get into this more in future articles.


  18. It is I only | July 1, 2013 at 10:52 pm |

    Just try to get “physical” Gold or Silver at that price!
    You will only be able to get a piece of paper that will state, you are the proud owner of ?? oz of Gold or Silver’ & it’s stored by us for your safety!
    Trust us! We have the Silver & the Gold stored in our vault! Would we lie to you?

  19. Thanks for a convincing, logical, out-of-the-box, analysis. I’m unable to judge the accuracy of the calculations, but, until I see anything better, will from now on take them as my baseline.

    I do however see one potential flaw in the analysis. for me, the key question is this: Who OWNS the primary silver producers? Given the interconnectedness of all major corporations, the answer, most likely, is this: The owners of the Federal Reserve and most other central banks of the world. These owners are comprised of a handful of families, with long-term plans for all of us and with a money-printing license. For them, then, money, costs, EROI, are no hurdles whatsoever. Hence, they can drive the price of silver, if they feel like it, to $5, and subsidize mining operations forever. The loss, for them, is pocket change. That way, they can keep production up yet achieve their goal of suppressing the price of silver, and earning trillions by salvaging their fiat currencies for as long as they wish to do so..

    That is, in short, the flaw of all rational economic analysis–underestimating the power and corruption of the central bankers. The free market is dead and, at least for the foreseeable future, the criminal bankers can fix the price of everything. Yes, in the long term, the system will collapse, but for people like us, who must base their investment timeline on 5-10 years at the most, there is no escape from the clutches of these criminals, short of an overhaul of the entire corrupt system.

    • Dr. Moti Nissani… while I agree that the GAME IS RIGGED, silver will never go back to $5. Just like oil can’t go below $70 and stay there. It would bankrupt the already weak shale oil industry that the U.S. is now counting on.

      Furthermore, there is a fundamental difference between the West and East. While the West prints money, buys bonds, and fabricates derivatives, the East continues to trade paper for physical gold and silver.

      Moreover, the Bullion Banks have transferred the Paper Short Gold risk to the Hedge Funds and are now nearly net Long. So, when the price moves up, it will be to their advantage. However, this was not the case after Bernanke announced QE3. The bullion banks were heavily short both gold and silver, so we had a 8 month manipulation to the downside to get the bullion banks from being heavily short to now long.

      As for who owns the miners, I would imagine some families there are connected with the paper money mob like those who run Barrick and etc care less about gold. However, there are a great deal of owners in different countries that do care about gold and silver.

      Lastly, even though there are subsidies, prices of energy, metal and commodities cannot remain below break-even for long.


      • Hi Steve,

        Thanks for the quick reply.

        In a rational world you are of course right; nothing can remain below the break-even point. In a rigged market, anything goes. They can subsidize production and keep the price at any level they want. Remember, these criminals can convert paper to money. I don’t know where the price of silver will be tomorrow or in 2015. But as long as we allow the international bankers to rule the world, it is they who will decide the prices of precious metals, not a logical analysis of the free market. If the price goes up from this point on, it will be because the bankers decided to let it go up, not because break-even point means anything to them.

        Let me amplify this perspective, which comes from my studies of the politics of said bankers (see link above). The April 15, 2013 move down was “predicted” (pre-announced) by Goldman Sachs and the Rockefeller media. Now, they have one unjustly-famous member of the bought economic profession say that gold would go to something like $1000. This is not a prediction, but a declaration of intention. He would get his reward soon enough for legitimizing the next leg down in the precious metals. That is how the system works, as we both agree: all rigged. Economics, logic, and the Constitution have keeled over. What we have is a criminal syndicate that can do anything it wants and violate any economic law with impunity. If I had any money to invest right now, I’d short silver, since the bankers made their intentions perfectly clear. At a certain point I’d buy–when they hint that the attack is over, but not before. They are in charge, not logic.

        I might be mistaken of course, and you certainly know a great deal more about the subject than I do. But, to be convinced, I need this analysis from you: Why can’t they drive the price of silver to, say, $5, and subsidize silver production? An idea for a future article?

        Thanks, anyway, for a most informative analysis.

        • goldsilverxt | July 10, 2013 at 10:37 am |

          Simple, they cannot drive it to $5 because the support and demand would is overwhelming at high prices.
          Even more simply, the silver market is already small enough, while money supply is exponentially greater than ever. Not to mention there will only be so much silver available at the price point of $5.
          With all the factors listed above, would it be super easy to corner and buy up all the silver priced at $5? Doesn’t take much money to buy up all the silver even at $20 if any fund or country will commit to it.
          That western criminal faction you speak about might not even benefit or get the chance to do $5…it would only create a flash bottom, before money from EVERYWHERE to flood into it, and move it back up to even $20 in very short order…and why not when they stand to gain?
          Again I repeat…with currency printing presses internationally that created such a HUGE money supply, $5 silver will never happen again…lol
          $5 was much much bigger in those days man, now $5 can only buy a starbucks cuppa.
          So HOW CAN SILVER GET TO $5????
          Wake up.

          • goldsilverxt | July 10, 2013 at 10:39 am |

            Edit* Simple, they cannot drive it to $5 because the support and demand is already overwhelming at higher prices.

  20. silver can’t go to 5 because before it reaches it has to to 10-15 first. but i believe when it reaches 10-15, a lot silver-related business will shut down or investors will take up whatever amount is offered without a blink.
    furthermore, i do believe the inventory behind SLV and in comex are much less than what they state.

    at current prices, the manipulator are making fiat money but are bleeding inventories at a faster rate.
    that’s why on june 28, when gold was hammered down 1179, silver barely moved, some deep pockets are defending silver. since the manipulators already covered their shorts, they have little incentive to drive it down much further, which will bleed physical inventory at a much faster rate than they’re willing to see.

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